Why Oasis fans should welcome price-gouging

The hotly anticipated comeback of a 1990s British legend sold out fast. Fans took to social media to complain. “Poor effort and a load of hype,” wrote one. “What a shitshow,” added another. “Anyone else loving the chaos?” asked an amused onlooker. To celebrate its 30th birthday, St. John, a restaurant that pioneered modern British cooking, brought back its menu from 1994, along with prices from 1994. As punters rushed to take advantage, tables were booked up in seconds—leaving most empty-handed.

Yet the fate of London’s foodies captured less attention than that of the parka-clad fans who missed out on tickets to see the reunion of Oasis, a laddish rock band. Owing to algorithmic “dynamic pricing”, in which prices of tickets adjust in response to demand, the cost of a standing ticket rose from £135 ($180) to £335 in the time many were queuing online, often for hours, to book. The government swiftly announced a probe. “We’ll grip this and make sure that tickets are available at a price that people can actually afford,” promised Sir Keir Starmer, Britain’s prime minister.

Price-gougers are popular villains. Kamala Harris, the Democratic candidate for president in America, has promised a ban to stop grocery stores from indulging in the practice. Many states have similar laws, often aimed at firms that raise the cost of essentials following disasters. The administration in which Ms Harris serves as vice-president has already filed an antitrust lawsuit against Ticketmaster, the company that ran the sale for the Oasis tour. Given that the firm has an estimated market share of 70% in America, it may have a case to answer. Additional fees for booking certainly look a little like the actions of a rent-seeker.

But there is a difference between monopolistic behaviour and allowing prices to respond to demand. In fact, dynamic pricing ought to be good for fans. As the contrasting examples of St. John and Oasis show, availability and affordability are in tension. In St. John’s case, ultra-low prices meant demand swamped supply. The menu may have been affordable, yet only for the lucky few who grabbed a table. Dedicated fans of Oasis can at least make the gigs, even if they have to pay through the nose.

In an ideal market prices reflect the willingness of consumers to pay. If Oasis tickets were sold for £20—roughly the amount that they cost three decades ago—many would be snapped up by people looking for a cheap night out, rather than genuine devotees. A fair portion would probably not turn up, because they were not that keen to see the band in the first place. The crowd might sing along to the hits but remain silent for the deeper cuts.

Britain’s government may also crack down on dynamic pricing for flights, arguing that parents should not be penalised for having to take holidays during school breaks. Yet would parents really welcome competition from the childless, who would no longer enjoy a discount for travelling at other times? Economists favour responsive prices since they can ensure that both consumer and producer “surplus” is maximised: those who value the good or service most get their hands on it; the seller gets a suitable reward.

Noel and Liam Gallagher, two brothers who are the only constant members of Oasis, have feuded for years. “It’s unsophisticated music. For unsophisticated people. Made by an unsophisticated man,” Noel once said of Liam’s solo work. They are now getting back together to make money. The availability of any ticket at all depends on the superstars’ anticipation of the returns on offer if they bury the hatchet. Oasis have already added two more London dates after the first tickets were snapped up (this time sold via an invite-only ballot for those who missed out). Even egregious forms of price-gouging can have similar effects. High prices after natural disasters can send a signal to companies that it is worthwhile overcoming disruption, or building stockpiles for next time.

Well-meaning types might respond that high prices help only the rich. For a billionaire with a casual interest in a band, a price that is eye-watering for those who politicians call “ordinary fans” will be negligible. But addressing such inequality through cheap tickets is foolish, even if it does not reduce supply or create a flourishing black market. Those who happened to get to the front of the queue would, in effect, enjoy a randomly allocated transfer from the artist’s earning potential. Ordinary people with no interest in the event would receive no benefit. A better approach is to address inequality directly through the tax-and-benefit system.

The most convincing charge against Oasis is not that they “sold out” but that they did so ineptly. Fans were forced both to queue and to pay high prices. Most businesses would rather avoid bad publicity from accusations of price-gouging. Although dynamic pricing offers a temporary windfall by extracting more money from the keenest customers, it can carry greater long-term costs by damaging a brand. Many performers reject Ticketmaster’s variable pricing; Oasis have now largely disavowed the process. High-end restaurants, bands and sports teams trade on mystique and loyalty as much as inherent quality. Exclusivity and serendipity, rather than an economist’s desire for efficiency, are part of what makes them fun. Queues build hype.

Balancing such concerns is an art as much as a science. In 2011 Next, a restaurant in Chicago, started to use dynamic pricing. It sells tickets with fluctuating prices, which depend on the date and time of the booking, helping to spread custom through the week and avoid no-shows. Those who go on a Tuesday can feel they got a good deal, even at a restaurant that can cost a pair of diners over $1,000. When an economist suggested an auction would be even more profitable, Nick Kokonas, a co-owner of the restaurant, explained that the aim was to offer fans a “great bargain”. Diners, if they get a ticket, can judge that for themselves. ■