An annual event takes place every October that leads to a large number of frustrated consumers – the sale of tickets for the Glastonbury festival. This year the sale of standard tickets began at 9.00am on Sunday 5th October. Within 27 minutes all of the 120,000 tickets had been sold and it was reported that over a million people had tried to access the website. Social media was full of messages from disappointed fans that had been unable to get a ticket.
The Glastonbury festival has grown in popularity and the organisers adopted a unique way of selling the tickets a number of years ago. They introduced a system that made it impossible for people to purchase tickets unless they had previously registered. Although there is no charge to register, in order to complete the process successfully, people have to submit a clear passport style photograph in Jpeg format. Once registered, customers are allocated a unique registration number which they must submit in order to purchase a ticket when they go on sale. Each buyer can purchase up to a maximum of 6 tickets and must provide a valid registration number for each separate ticket they obtain. Successful applicants receive a personalised ticket, including their photo, which cannot be re-sold. The organisers have been very clear about the rationale for introducing this scheme. They have stated that it is part of their
“on-going efforts to cut out ticket touting”
However a number of people have criticised the ticket sale process. These criticisms tend to fall into two key areas: first, the method used in the initial sale process and second, the constraints placed on resale after a ticket has been purchased.
The tickets are sold by the company SeeTickets and their Head of Business Development stated in an interview in 2013 that:
There is something like 1,100,000 customers registered to go to Glastonbury, and they all want a ticket. It’s a shame but there is nothing you can do about it. The 900,000 people that don’t get to go often come up with the argument, why don’t you just have a ballot? Why don’t we just register and a computer generated ballot just picks the winners? I think they’ve (Glastonbury) always had a view that if you get a ticket to Glastonbury there’s an element of work that you have to do to achieve that and it does reward that commitment. I think there’s a sense that if you use a ballot then maybe you’d get some people who were not as committed.
However responding to these comments a customer commented that:
I’ve been lucky in the past and got tickets within minutes and like this year tried all morning and come away empty handed. Whether I have been successful has nothing to do with hard work but the vagaries of the internet and a bit of luck.
Another customer commented:
No ballot! It’s too random. People who really,really want to go should get the tickets, so the only fair way is regional ticket sales, where you could queue ( overnight if required) to get your ticket. This is the only fair way. Year after year genuine fans miss out. This way fans who are willing to make an effort get the chance, rather than a ballot or the random computer system which they have at present.
Others have criticised the limited ability consumers are given to resell their tickets. The full cost of a ticket for the 2015 festival is £220 plus a £5 booking fee. When the tickets are originally sold in October, the buyers have to pay a £50 deposit and at this point none of the bands playing at the festival have been announced. The remaining balance of £175 is due at the beginning of April by which point some of the bands/acts will have been confirmed. Anyone who decides not to pay the balance or cancel their order before this date is refunded their deposit, minus an administration fee. Those tickets are then put forward for re-sale. The re-sale process typically takes place at the end of April and once again is only open to people who have previously registered. Last year 10,000 tickets were re-sold in just 12 minutes! Once this period in April is over the re-sale of tickets is prohibited even though the complete line-up for the festival may not have been confirmed.
The secondary ticket company Viagogo reported the results from research they had carried out on the 2014 festival. This found that following the relatively late announcement of Metallica as one of the headline acts,78% of people who had bought a ticket said they would have resold it if they’d had the chance.
A spokesperson from Viagogo stated that:
We believe that once you’ve bought a ticket it’s yours and if you want to sell it or give it away, you should be allowed to do so. In this case, with an unpopular headline act announced late, ticket holders lose out because they can’t resell their tickets and Metallica fans lose out because they can’t buy them.
Those people who either did not get a ticket or are left with a ticket they would rather re-sell will no doubt continue to complain about the ticket selling process.
The economics of GlastonburyThe Economist (24/6/14)
Handbag Economics: How much Glastonbury will really cost you Handbag Economics (12/6/14)
Should Glastonbury Festival tickets go to the ballot? Virtual Festivals (8/10/13)
Glastonbury 2014: Four in five fans wanted to resell tickets after Metallica announcement The Independent (26/6/14)
Third of Glasto fans put-off by strict ‘no ticket resale policy’ – but 2015 is still a sell-out The Mirror (6/10/14)
“People wanted to sell Glastonbury tickets!” says ticketing website Bad PR (3/7/14)
The pain of Glastonbury tickets – in two charts The Mirror (6/10/14)
Questions
- What is the opportunity cost of going to the Glastonbury Festival? Discuss some of the non-ticket factors you have included in your calculations.
- Draw a demand and supply diagram to illustrate the market for Glastonbury tickets. NB think carefully about the shape of the supply curve in both the short-run and the long run. Is the current price of a ticket at the market clearing level? Explain your answer.
- The sale and re-sale of tickets takes place before the all the headline acts have been announced. Illustrate what will happen to the demand curve for consumers with different preferences once the headline acts have been announced.
- Assess the relative costs and benefits of using a ballot instead of the current system used by the festival organisers to sell of tickets.
- The organisers of the festival introduced the registration process in order to limit the re-sale of the tickets. Analyse the impact of this policy on Pareto and allocative efficiency? Will the policy cause any deadweight welfare loss? What factors will determine the size of any deadweight welfare loss?
- Suggest some reasons why care may need to be taken when using the results from the research carried out by Viagogo.
A few months ago, in a post on this site I reported that the Competition Commission (CC) had completed their provisional investigation into the concrete and cement market in Great Britain. As I discussed, they concluded that coordination between the main cement producers was resulting in high prices. They are particularly concerned about the impact of high prices in this market because:
Cement is an essential product for the construction and building sectors and the amount of such work that is funded by the public purse only underlines the importance of ensuring that customers get better value for money. We believe our measures can bring about a substantial, swift and lasting increase in competition in this economically vital market.
The next step was for the CC to consider how they could remedy the situation and hopefully improve competition in the market.
Earlier this month, the CC announced the remedies they intend to impose. Having previously suggested that they intended to impose hard-hitting measures, they have been true to their word. The market leader, Lafarge Tarmac, will be required to sell one of its cement plants to facilitate a new entrant into the market. According to Professor Martin Cave, the CC’s Deputy Chairman who led the inquiry:
We believe that the entry of a new, independent cement producer is the only way to disturb the established structure and behaviour in this market which has persisted for a number of years and led to higher prices for customers.
In addition, the CC is also putting in place measures to limit the publication of production data and price announcements. It is hoped that these measures will reduce transparency in the market.
However, Lafarge Tarmac disagrees with the sale they are being forced to make. This is in part because, as I discussed in the earlier post, they had previously been allowed by the CC to form a joint venture (JV) with one its main rivals:
We are disappointed that the Competition Commission has asked Lafarge Tarmac to divest another cement plant only a year after it allowed the creation of the JV. This is not reasonable or proportionate and we have not been given a fair opportunity to defend our position.
In addition, Lafarge Tarmac is quoted in the above article as suggesting that the end result of the CC’s intervention will be harm to consumers. It will be extremely interesting to monitor how this market develops.
Articles
Competition Commission confirms plan for new cement producer The Construction Index, (14/01/14)
Competition Commission improves competition in the UK. Again. Global Cement, (22/01/14)
Report
Aggregates, cement and ready-mix concrete market investigation, Final report, Competition Commission, (14/01/14)
Questions
- Why might the publication of production data and price announcements help to facilitate coordination between firms?
- Would you expect the new entrant or the measures to limit the publication of production data and price announcements to have more impact on competition in the market?
- Using a supply and demand model, describe the impact the CC’s intervention could have on the construction market.
According to the supply and demand model, we would expect the price of turkeys to be high at this time of year. After all, last Christmas in the UK over 10 million turkeys were consumed and, therefore, this high level of demand should cause prices to rise. This is certainly what happens in other markets when there is a substantial increase in demand.
However, evidence from Thanksgiving in the USA suggests that this might not be the case. According to this article from the New York Times, data suggests that the price of frozen turkeys in the US falls by around 9% between October and November, coinciding with the substantial increase in demand for Thanksgiving celebrations. The article then goes on to suggest a number of plausible demand and supply-side explanations for this fall in price.
Turkey Economics 101: Why turkeys are so darn cheap this time of year Culinate (25/11/13)
Why Does Turkey Get Cheaper Around Thanksgiving? Slate, Matthew Yglesias (21/11/12)
Questions
- How elastic do you think the demand for turkeys will be at Christmas?
- What type of products are well suited to being used as loss-leaders?
- Which of the explanations for the increase in prices do you find most convincing?
- What evidence might be useful to distinguish between the different explanations?
A remarkable event took place in Venezuela on Friday 8th November. Soldiers, on the orders of the president, temporarily occupied a chain of shops run by a leading electrical retailer called Dakar. The shops were forced to cut the prices of their electrical appliances and five managers were arrested and accused of ‘hiking up’ prices.
Unsurprisingly, news of these lower prices spread very quickly and long queues rapidly appeared outside the stores as people hoped to buy plasma televisions, fridges and washing machines at bargain prices. On Sunday 9th November, the president, Nicolas Maduro, gave a televised address in which he condemned the owners of the stores and announced that he was going to ask the National Assembly to grant him extra powers so that he could extend price controls to all consumer goods. He stated that he would next turn his attention to stores selling toys, cars, textiles and shoes.
The use of price controls in Venezuela is not new and dates back to 2003 when they were first introduced by the then president Hugo Chavez. Initially the regulations were imposed on various foods and basic goods. For example, by 2009 maximum prices had been set for cooking oil, white rice, sugar, coffee, flour, margarine, pasta and cheese. Businesses often complained that the maximum prices set by the government were below the costs of production. For example after a maximum price of 2.15 Bolivares was placed on a kilo of rice, producers argued that the cost of producing a kilo of rice was 4.41 Bolivares.
The impact of the maximum prices in Venezuela appears to have been exactly what the theories in the economics textbooks would have predicted – shortages, long queues of people waiting outside shops and a flourishing black market. An article on the shortage of toilet rolls has been discussed in a previous article on this news site: Shortages in Venezuela- what’s the solution? However this has not stopped the Venezuelan government extending the scheme and increasing the number of products that have maximum prices imposed on them. In 2011 Hugo Chavez argued that the policy was required because:
The market has…become a perverse mechanism where big monopolies, the big trans-nationals and the bourgeoise dominate and ransack the people.
Economics textbooks often include some analysis of the impact of price ceilings on a competitive market. The effects on consumer surplus, producer surplus and deadweight welfare are usually discussed. However the potential administrative costs are rarely considered. The Venezuelan case helps to illustrate how in practise these costs could be quite significant.
For example, in April 2012 price controls in Venezuela were extended to a range of 19 products including fruit juice, toilet paper, nappies, soap, detergent, deodorant, toothpaste, baby food, floor polish, mineral water and razor blades. This caused a reduction in prices of between 4% and 25%. However this did not simply mean setting 19 different maximum prices because the goods were all sold in different quantities or different package sizes. For example a tube of toothpaste could be purchased in 4 different sizes – 50ml, 75ml, 100ml and 150 ml. Therefore officials had to set 4 different figures. Nappies were sold in 12 different package sizes ranging from10 nappies/packet to78 nappies/packet. Once again this meant that the administrators had to set 10 different maximum prices just for nappies. In total across the 19 products government officials had to set prices for 616 different individual items!! Companies were given just one month to adjust to the new legislation.
Whenever maximum prices are imposed on a competitive market both frustrated buyers and sellers have an incentive to evade them and trade illegally. Therefore the government established a number of organisations in an attempt to make sure the prices were enforced. One agency is called The National Superintendency of Fair Costs and Prices or Sundecop. Officials from this agency were sent out to 82 retail outlets in April 2012 to try to make sure that firms were sticking to the new regulated prices. They also printed and handed out leaflets to the public informing them of the changes. Another agency is called ‘The Institute for the Defense of People’s Access to Goods and Services’ or ‘Indepabis’. This organisation launched a new strategy in June 2012 in order to monitor compliance. This included the creation of a network called the Friends of Indepabis which would act as an information point for members of the public to report illegal pricing. A new complaints phone line was also introduced.
If president Maduro is granted the power to extend maximum prices to all consumer products, then one can only begin to imagine the extra administrative costs involved with implementing the policy.
Venezuelan president Maduro ‘to expand price controls’ BBC News (11/11/13)
Venezuela sends in troops to force electronics chain to charge ‘fair’ prices NBC News (13/11/13)
Venezuela appliances crackdown spurs uncertainty ABC news (13/11/13)
Venezuela’s government seizes electronic goods shops BBC News (9/11/13)
Venezuelan government sends TROOPS into electronics chain to force them to sell goods at a “fair price” DailyMirror (10/11/13)
Shocher: Price Controls Lead to Shortages in Venezuela Free Advice, Robert Murphy (2/10/13)
Venezuelan Government Action against Overpricing Welcomed by Citizens, Manipulated by Media venezuelanalysis (12/11/13).
Questions
- Explain why a maximum price imposed on a competitive market might generate a shortage. Draw a diagram to illustrate and explain your answer.
- Are there any circumstances when a maximum price would not cause a shortage in a competitive market?
- Analyse the impact of a maximum price on consumer surplus, producer surplus and deadweight welfare loss. Assume the market is competitive and clearly state any other assumptions you have made in your analysis. Comment on the impact of the price ceiling on economic efficiency.
- Illustrate and explain what would happen to consumer surplus and deadweight welfare loss if the available goods for sale were only purchased by the consumers with the lowest willingness to pay.
- Why might a maximum price lead to a flourishing black market?
- The former president, Hugo Chavez, argued that the price regulations were required because “big monopolies… ransack the people”. Using economic theory discuss this statement. Examine the impact of a maximum price on a pure monopoly.
A bumper harvest should be good news for farmers – but not if it drives down prices. This is the position facing many Australian farmers. After a relatively wet summer a year ago and a mild winter this year, crop yields have soared. But the prices farmers can get in wholesale markets have been so low that many have resorted to setting up their own farm shops or selling in farmers’ markets or from the backs of ‘utes’ (utility vehicles, i.e. pickup trucks) or at roadside stalls.
And the supply problem is not just one of increased domestic supply: cheap food imports, often of inferior quality, have been flooding into Australia. Increasing food exports, 
especially to Asia, would help Australian farmers, but here again there is competition in these markets from other countries.
The problem of increased Australian supply is even more serious for Australian farmers in areas where harvests have not been so good. Australia is a huge country and conditions, although generally favourable this year, have been poor in some areas. Here farmers face the double disaster of low output and low prices.
Australian dairy farmers too are facing problems of falling prices. Price deregulation and the monopsony power of supermarkets have driven down 
the price of milk and other dairy products. Since deregulation in 2000, the number of dairy farms has halved, as many smaller family farms go out of business and larger ‘industrial-scale’ farms grow.
So are there any solutions? The BBC article looks at things being done in Tasmania to help small farmers, but questions whether small farmers have much of a future more generally in Australia?
Articles
Australia’s small farmers struggling with low prices BBC News, Phil Mercer (31/10/13)
Commodity prices edge lower in October Sky News Australia (1/11/13)
Low prices spoil perfect season for Australian farmers ABC News, Eric Tlozek and Courtney Wilson (18/9/13)
Agri-businesses taking over the farm The Guardian (Australia) (6/11/13)
Data
Commodity prices Index Mundi
Agriculture in Australia Wikipedia
Farm inputs & costs Dairy Australia
Questions
- How does the fallacy of composition relate to the ‘problem’ of good harvests?
- How price elastic is the demand for specific crops likely to be? Why may individual farmers face an elasticity of demand close to infinity?
- Illustrate the problem for small farmers in Australia with a demand and supply diagram.
- Is there any way in which farmers, either individually or collectively, can make their demand less elastic?
- Comment on the following statement by a sugar cane farmer: “We’ve got that much money tied up (in the business) we just can’t walk away”. Under what circumstances would it make sense to ‘walk away’?
- How does the monopsony power of supermarkets influence the prices farmers receive?
- Discuss ways in which the federal government in Australia could support farmers.
An annual event takes place every October that leads to a large number of frustrated consumers – the sale of tickets for the Glastonbury festival. This year the sale of standard tickets began at 9.00am on Sunday 5th October. Within 27 minutes all of the 120,000 tickets had been sold and it was reported that over a million people had tried to access the website. Social media was full of messages from disappointed fans that had been unable to get a ticket.
