CBC reported earlier this week:
Ontario Parks is cracking down on people who book camping sites and resell their reservations for profit.
The province doesn't condone reselling reservations. because it's been particularly difficult to book a site, said a spokesperson for Jeff Yurek, minister of environment, conservation and parks.
This year has seen a particular surge in campsite bookings and competition for coveted spots...
"We know that there are instances where individuals are attempting to sell reservations with the intention to make a profit," Chelsea Dolan said in an email to CBC Kitchener-Waterloo on Thursday evening.
As of Saturday, anyone with reservations won't be allowed to resell them.
A common rationale for preventing the scalping (or resale) of tickets is that the scalpers make consumers worse off. But should that in itself be a reason to discourage scalping? Consider the market for camping sites, where there is a fixed number of sites made available, as shown in the diagram below. The supply of camping sites S0 is fixed at Q0 - if the price rises, more sites will not suddenly be made available (note that the diagram assumes that the marginal cost of providing sites up to Q0 is zero).
Demand for camping sites is high (D0), leading to a relatively high equilibrium price (P0). However, camping sites are priced at P1, below the equilibrium (and market-clearing) price. At this lower price, there is excess demand for camping sites (a shortage) - the quantity of sites demanded is Qd, while the quantity of sites that are available is fixed at Q0.
With the low camping site price P1, the consumer surplus (the difference between the price the consumers are willing to pay, and the price they actually pay) is the area ABCP1. Producer surplus (essentially the profits for Ontario Parks) is the area P1CDO. Total welfare (the sum of producer and consumer surplus) is the area ABCDO. At the higher price P0 due to the actions of scalpers (buying at P1 and selling at P0), the consumer surplus decreases to ABP0, while producer surplus remains unchanged. The scalpers gain a surplus (or profit) of the area P0BCP1, and total welfare (the sum of producer and consumer surplus, and scalper surplus) remains ABCDO. So the camping site scalpers don't change total welfare at all, just the distribution of that welfare between the parties. However, they do clearly make consumers worse off as a group, because consumer surplus is lower.
However, let's go back to considering the price at P1. At that price, the excess demand means that there are many campers who are willing and able to pay a price that is higher than P1, who miss out on a camping site because of the excess demand. If the price was a little higher than P1, then that would reduce the amount of excess demand, and fewer willing buyers (at the higher price) would be missing out on a camping site. In fact, you would need to raise the price all the way to P0 before you get to a situation where no willing buyers are missing out. And, that's exactly what the scalpers do. By banning scalpers, Ontario Parks are essentially protecting the excess demand. They are ensuring that some people, who are willing and able to pay the market price, will miss out on camping sites.
You might argue that raising the price will squeeze consumers out of the market, starting with those who are willing and able to pay the least for a camping site, and that such an outcome is unfair. [*] But is it really fairer that there are many people willing to pay the market price who are missing out on camping sites?
Finally, Ontario Parks is clearly missing a trick here. Why are they pricing so low, and allowing scalpers to earn a surplus at all. If Ontario Parks raised the price of camping sites to P0, there would be no market for scalpers, or at least there would be no profits for them to make, and all of the combined producer surplus and scalper surplus would belong to Ontario Parks. Think of how much of an improved service Ontario Parks could offer with all that additional revenue. What are they thinking?
[HT: Marginal Revolution]
*****
[*] Market pricing is incredibly unfair. Personally, I strongly believe that the pricing of Lamborghinis is unfair. They should be priced in such a way that I can afford to drive a different coloured one to work each day of the week. I demand action!
Read more:
- The Super Rugby final and ticket scalping
- Harry Potter and the chamber of scalpers
- The economics of ticket scalping
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