lightly that price - would bring the late price down to v ....

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as brokers would enter and undercut slightly that price. Therefore, the promoter cannot pro. tably sell tickets in the late market. In short, the only equilibrium arises when the promoter sells tickets early to capture the diehard fans and selects a venue that can cater both to diehard fans and busy professionals. The key result is that pro. t maximization on the side of the promoter leaves pro. t opportunities for brokers. The promoter cannot capture the pro. ts earned by brokers and even more surprisingly, the promoter cannot preempt brokers and deter them from entering. The promoter would like to sell to busy professionals in the late market but cannot do so, because brokers have already bought the tickets that were meant for them. Now return to the assumption that only brokers can resell tickets. If diehard fans could resell, then they would compete with brokers in the late market, and this
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Unformatted text preview: would bring the late price down to v . This is a possibility, but only if enough diehard fans are willing to change their plans. There are at least two reasons why this may not happen. First, diehard fans have to make an early personal investment in travel and work plans to join the event, which implies that the value that diehard fans place on the event is more than just what they paid for their ticket in the early market. If their personal investment is high enough, then they will not be willing to resell in the late market. Second, the behavioral economics literature has shown that people typically report higher valuations on objects after they become owners of the objects, a phenomenon known as the endowment effect (Kahneman, Knetsch and Thaler, 1991), and Krueger (2001) has found some evidence suggesting that this hypothesis applies to tickets....
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