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EC304 (Making of Economics Policy) - Notes (Term 2)
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Week N°1: Secondary Event TicketingDEFINITION:
- Consumer Rights Act (2015): duty on main (e.g. event organisers) and secondary ticketing facilities to
provide core information about tickets (e.g. face value, particular seat identification, usage restrictions, seller
identity) as well as prohibition of cancelling tickets and obligation to report criminal activity on the facility
(i.e. Trading Standards Services Authority ability to fine £5000) ® OR: Failure of law to be respected
- Secondary Ticketing Operators: two-sided market as the need to attract sellers and buyers with Fan-to-Fan
Face-Value Sellers (i.e. no charges to seller but must set a price no higher than face value + booking fees,
commission charge to buyers, small-scale activity) (e.g. Twickets) and Fan-to-Fan Commercial sellers (i.e.
charges substantial fees to sellers and buyers but large ones are offered special terms, do not set prices charged
by seller, act as ticket profit-maximising reselling bots that sell for high prices) (e.g. Viagogo)
OR PARADOXES:
- Prohibiting? (welfare lost without secondary ticket market if tickets not passed to anyone if impossibility for
fans to attend) Criminality? (issue of fake tickets and of secondary ticketing at above face value are logically
separate although secondary sites do provide a convenient means of money laundering by criminal elements)
Solutions? National Price-Cap: historically does not work/Resale Ban: too much power to primary market
then/Lead Body: investing followed by action coordinated with the police but expensive/Glastonbury’s
solution: buyers put down a deposit and confirm whether they pay the remaining money months after,
returned tickets are reallocated, photo incorporated into the ticket, high checks in entry of site
Pascal Courty (Ticket resale, Nots, and the Fair Price Ticketing Curse 2019):
- Online market-place emergence (e.g. 2019: Ticket Resale = $8BN Industry, Stubhub = 48 countries, 20% tickets
= Secondary Sites, Alliance between Sport Event Organisers/Online Platforms to certify authenticity)
- Curse for free events (e.g. Temporary art exhibitions), Bots curse (i.e. Resell price higher than face-value),
Computer Programs (i.e. automatic buy/resell for profits)
- Fair Price Ticketing Curse (FPTC): situation in which the event organiser sells tickets at prices that do not
correspond to the underlying demand conditions and does not want resellers to profit from resale
opportunities ® However: cannot prevent resellers from using bots to acquire tickets before fans (i.e.
assumption that tickets are under-priced and there is an excess demand in the primary market)
- ® SOLUTIONS: Resale Ban (RB) (i.e. tickets non-transferable and identity checked), Resale Market (RM) (i.e.
the common welfare is reduced as soon as brokers enter and increase as soon as fans enter the market),
Centralised Exchange (CE) (i.e. tickets randomly allocated in the primary market, served fans received refund if
return tickets, unserved fans are obtaining tickets randomly),
- DETER BROKER ENTRY: Real-time screening (e.g. of bots with CAPTCHA) Pre-sale Registration (e.g. verified
fans depending on their social medias), Post-Sale Audit (e.g. checking to whether buyers resell their ticket
thanks to ticket number), Non-Transferability Restrictions (e.g. Use of same credit at admission with the one
used to purchase), Fan-to-Fan Exchange platforms (e.g. Exchanges at face-value or below)
Schneiderman (Obstructed View 2016):
- Willingness to Pay (WTP) (maximum dollar amount afan is willing to pay for a ticket) ≠ Willingness to
Accept (WTA) (minimum dollar amount at which a fan is willing to sell her ticket) since different incomes
- STUDY: Resale industry in New York City since 1999 (e.g. 2014: U2 Concert in Maddison, Bot purchased
15.000 tickets in day, resell 1000% face-value)
- ® Solutions: Transparent Ticket Allocations/Legislative Reforms/Computer Software to Block Bots/On-
line Ticket Sales Act (2014) (Prohibition of all activities in the business of reselling without a licence)
Sweeting (Dynamic pricing behaviour in perishable goods markets 2012):
- Dynamic Pricing (DP) Strategies Model: resellers of perishable goods (e.g. concert tickets) strategy to change
prices in function of their internal inventory, the time remaining to the event and the predicted consumer
willing-to-pay amount to obtain tickets (e.g. decrease prices the closer the event is)
- Strategic Buyers: assumption that fans delay purchasing if these expect prices to fall before the event
- MODEL CONCLUSION: Major League Baseball (MLB) prices decline as close the game/Strategic Buyers
behaviour irrational/not commonly shared across buyers/Use of fixed price more common than auction
Waterson (Ticketing as if consumers mattered 2018):
- Competition Markets Authority (CMA 2017): Platforms obligation to declare identity of sellers
- Digital Economy Act (2017): Provides government theoretical power to ban bots from a platform (e.g.
Department of Justice investigation: average primary seller fees at 27%) and attempt to improve competition
- Artists involvement (e.g. Ed Sheeran: Collaboration with Twickets to cap resale price at 10% above the
original) despite strong decorrelation between ticket price (i.e. price given)/ticket value (i.e. income price)
, Week N°2: The Making of Global Regulation
Thiemann (The Growth of Shadow Banking 2018):
- Financial Stability Board (2010): Shadow Banking: or “non-bank financial intermediation” is a “credit
intermediation involving entities and activities (fully or partly) outside of the regular banking system” in order
to provide banks the infrastructure to allocate surplus resources to individuals and companies with deficits
(e.g. risk pooling, contractual savings, and market brokering)
- Dialectical Unity: “opposing and shared interests together determine the evolution of financial systems as both
actors depend on each other” with a consequence that “in order to control market participants in destroying
the regulatory infrastructure (…) regulators need to draw on private expertise more than ever”
EPISTEMIC COMMUNITIES:
- Basel Committee on Banking Supervision (BCBS): consultative intergovernmental organization comprised of
central banks and finance ministers that introduced Basel III (2011) with capital requirements (i.e.
minimum core capital increases from 4% to 6%), liquidity requirements (i.e. must be able to cover their net
cash outflows over thirty days) and leverage ratios (i.e. must cover at least 3% of their liabilities at all times)
- Stiglitz (Central Banking in a Democratic Society 1998): Technocratic governance: replete with a series of
interconnected practical constraints and social tensions and political problems such that “decisions made by
central bankers are not just technical decisions, but involve trade-offs, judgments (...) and these involve values”
- Aho and Levinson (After Reagan: Confronting the Changed World Economy 1988): “to a far greater extent than
in the past, the individuals who must make the difficult economic choices in Washington D.C. are in the dark”
- Tucker (Unelected Power 2018): policy produced from unelected technocracy holds no democratic accountability
ARBITRAGE:
- Aitken (Regularisation of Fringe Credit: Payday Lending and the Borders of Global Financial Practice 2010):
« many of the financial system innovations emerge out of complicated new diagrams of financial practice (...)
and novel mechanisms which connect financial markets with other kinds of space and population » ®
Regulatory arbitrage: practice whereby firms capitalise on loopholes in regulatory systems in order to
circumvent unfavourable regulation (e.g. Cayman Islands shields £20Bn a year from Her Majesty HM Treasury)
- Woods (Speech at the Bank of England 2017): “some innovation is pure regulatory arbitrage – that is, action
taken by firms to reduce specific regulatory requirements without any commensurate reduction in their risk”
RISK ASSESSMENT:
- Goodhart (The Basel Committee on Banking Supervision 2011): Basel I (1988): initial proposals rejected by
commercial banks since considered technically inferior to the Vector Automatic Regression (VAR) models used ®
REQUIREMENTS: complexity increases financial opacity since relies on bank-level parameters
- Best (The Limits of Financial Risk Management 2010): failures in risk-assessments since regulation does not
capture residual risks of off-balance sheet activities (e.g. interest rates changes), credit-risk metrics (e.g.
derivatives, repurchase agreements), entity-centred (e.g. focus on liquidity risk rather than holistic risk) and
empirically imperfect (e.g. VAR modelling, Balance-Sheet forecasting).
Mattli and Woods (In Whose Benefit? 2009):
- regulation: “organisation and control of economic, political, and social activities by means of making,
implementing, monitoring, and enforcing of rules” (national regulation: hard rules by elected governments ≠
global regulation: soft rules as best practices by public-private networks without democratic legitimacy)
- DIMENSIONS OF REGULATION: demand-side factors: information (i.e. understanding of biases of the
regulatory status quo)/entrepreneurs (i.e. coalition against defenders of the status quo as a first step for
change) & supply-side factors: institutional context (i.e. within which the demand for regulatory change is
formed, implemented, monitored, and enforced)
- Drezner (All Politics Is Global 2007): transnational regulation: (1) great powers are the key actors forging
the rules of the global economy (2) these coerce others into compliance if necessary (3) governments “ideal
points” are their own pre-existing national regulatory frameworks that developed from domestic problems
- Wilson (The Politics of Regulation 1980): capture/special interest regulation theory: dismiss of public
interest approach since politicians are assumed self-interested since sell regulatory policy to the highest
special-interest bidder able to provide campaign contributions
- public interest: course of action that is best for society as a whole according to some absolute standard of
value (i.e. idealist school), impossible achievement since there is no community but only special-interest
groups that exist with heterogeneous preferences (i.e. rejectionist school), outcome of a deliberative process
that allows all to have a voice in its formation such that it provides legitimacy (i.e. proceduralist school)
Coleman and Porter (International Institutions, Globalization and Democracy 2000):
- globalisation: “processes whereby the boundaries of social relations become more autonomous from physical
location, and time and distance become less of an obstacle to building human relationships in these new spaces”
- cosmopolitan society: expansion of democracy in global sites of power through reforms to existing
international organizations and law from the expansion of the role of global civil society ® PARADOX:
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