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Why don’t scalpers provide liquidity?

If Alice has season tickets to a basketball team, and Bob buys some of them to scalp later, isn’t he adding liquidity?

I know nothing.



Of course they provide liquidity.

But the whole point is that the entertainer doesn't want liquidity, they want illiquidity, for two reasons:

1. The marketing value of a ticket being impossible to obtain. The best way to do this is to sell the ticket below the market clearing price. Then you get rows of people sleeping before the day they go on sale, etc. A lot of people want that image as they believe long term the marketing will generate more revenue.

2. They want fanatical fans rather than rich fans. They may feed off the worship or cheering and want those who go through a lot of hoops to get the tickets, rather than a salesman using the company expense account to wine some client who might not throw their bras on the stage or paint their face green and scream for their team. In this sense, you can think of the money the entertainer gives up by selling below market as the purchase price of audience enthusiasm.

Now if the scalper steps in, and instead of having the underwear tosser you get the businessman, then many entertainers/performers would be pretty upset as the scalper took for themselves the enthusiasm payment and left the entertainer with the market-rate fans.


Scalpers provide liquidity to producers of goods in markets that don't need additional liquidity. For the consumers, he does not provide any liquidity at all. So effectively, scalpers do not provide any "effective" liquidity.

Scalpers always buy stuff where there is already high organic demand from actual end users, because scalping only works if demand outstrips supply. This demand is the liquidity the producer of the stuff needs, and it's already sufficient for them to sell all their inventory quickly, so the scalper obviously does not provide any useful service to the producer.

For the buyers, they act as a seller, but for each item they offer, the original producer has one less to offer, as the scalper has bought it from the original producer. Therefore, they provide exactly no additional liquidity for the end user.

The only thing they do is ratchet up prices and reduce customer service levels (the original producer or an actual, professional reseller will most likely offer better customer services than some random guy on eBay), which are both net negatives for everyone but the scalper.


Aha, I was thinking of scalpers like the guy outside the stadium buying and selling tickets from fans, creating a secondary market. I can see how a scalper who swoops in and buys up the original tickets is not doing that.


I don't know how to frame this in economic terms, but here's an observation. It's no easier buying a GPU from a scalper on eBay than it is buying that GPU from Bestbuy. In fact, it's probably harder. So, they seem to be making it harder to obtain the item.




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