A popular band announces one concert. 50,000 fans want tickets but the stadium holds 20,000. At the planned price of $150 there is a shortage. Compare ways of deciding who gets in.
Let the price rise
- Organiser: Higher revenue, and fewer touts reselling tickets for profit.
- Fans with high incomes: More likely to get tickets, since they can pay more.
- Fans with low incomes: Many are priced out, even if they are keen fans.
This is the price mechanism rationing the tickets. It clears the shortage, but tickets go to those able to pay, not necessarily those who want them most.
Keep $150 and hold a ballot
- Fans: Everyone has an equal chance, whatever their income.
- Touts: Winners can resell tickets at high prices unless names are checked.
- Organiser: Gives up the extra revenue a higher price would bring.
A ballot rations by chance instead of price. It seems fairer, but it leaves the shortage in place, which can create a resale market.
Keep $150, first come first served
- Fans with free time: Those who can queue or refresh the website fastest win.
- Working fans: Time spent queueing is an opportunity cost they may not afford.
- Website: Huge traffic may crash the booking system.
Queueing rations by time and luck. The price stays low, but fans pay in time, which is a hidden cost.