Monday, December 30, 2019

Concert promoters are using Airline-style dynamic pricing to increase revenue

See Why Concert Tickets Are So Expensive: Over the past decade, the average ticket price for the top 100 North American tours has increased 55% to $94.83 by Anne Steele of The WSJ.

The concert venues and promoters are trying to raise prices on the seats that will have the highest demand. Airlines do this as demand increases for certain flights.

I think that the demand for concert tickets might be (or might have been) less than one since they raised prices but revenue still went up (see the previous post).

These higher prices might increase efficiency. If prices are too low, you will have to have some other rationing system. If the price is below where supply and demand intersect, then you get shortages. Maybe tickets go to who is ever first in line (even if that means buying them online). People might stop what they are doing to try to buy tickets. Waiting in line is not an efficient outcome. If higher prices stop that from happening, efficiency is enhanced.

"Over the past decade, the average ticket price for the top 100 North American tours has increased 55% to $94.83. The average gross per show more than doubled over the decade to $958,000."

"ticketing companies are offering new technology to squeeze out scalpers and make more money the first time a ticket is sold."

"The boom in the live-events business fills a gap in many artists’ revenue streams. As piracy decimated recorded music sales starting in the early 2000s, artists began to rely on touring, ever more so in the past decade. Live shows account for some 75% of musicians’ income, compared with around 30% in the 1980s and 1990s, according to analysis by Alan Krueger, a Princeton University economist who died this year.

Among other things, artists and promoters are now more apt to sell their best seats for what the market will bear, something they avoided in the past either for fear of being perceived as taking advantage of loyal fans or because they didn’t know how much the public would be willing to pay."

"Airline-style dynamic pricing, offered by Live Nation subsidiary Ticketmaster and others, makes it possible to change the list prices at any time or automatically adjust them up or down based on demand.

Promoters, meanwhile, have been pricing seats higher—particularly the most desirable ones, such as those at the front of the house—and collecting more on VIP packages like meet-and-greets and merchandise that get tacked onto tickets. Taking another page from airlines’ playbooks, Live Nation has begun charging more for aisle seats at some shows—labeling them “premium aisle seats” and collecting as much as $30 more a piece."

"Dynamic-pricing efforts . . . put an additional $500 million in artists’ pockets in the 18 months that ended in June . . . driven largely by an increase of more than 30% in front-of-house pricing at amphitheaters and arenas"

"The higher pricing of the best seats is often accompanied by lower prices farther from the stage."

"The Justice Department last week reached an agreement with Live Nation following allegations the company sought to strong-arm concert venues into using Ticketmaster. Live Nation denied the allegations, according to a court filing, but agreed to conditions requested by the Justice Department.

The department believes Live Nation’s conduct has violated the terms under which the government allowed the top concert promoter to merge with the dominant ticket seller in 2010. That agreement, known as a consent decree, forbid Live Nation from forcing venues that want to book the concert promoter’s tours to use Ticketmaster for those shows, and from retaliating when venues choose to use a ticketing competitor instead—conditions designed to keep consumer prices in check by preserving competition in the live-event market."

Sunday, December 29, 2019

This Has Been the Best Year Ever

For humanity over all, life just keeps getting better.

By Nicholas Kristof. Excerpts:
"2019 was probably the year in which children were least likely to die, adults were least likely to be illiterate and people were least likely to suffer excruciating and disfiguring diseases.

Every single day in recent years, another 325,000 people got their first access to electricity. Each day, more than 200,000 got piped water for the first time. And some 650,000 went online for the first time, every single day."

"Historically, almost half of all humans died in childhood. As recently as 1950, 27 percent of all children still died by age 15. Now that figure has dropped to about 4 percent."

"A majority of Americans say in polls that the share of the world population living in poverty is increasing — yet one of the trends of the last 50 years has been a huge reduction in global poverty.

"As recently as 1981, 42 percent of the planet’s population endured “extreme poverty,” defined by the United Nations as living on less than about $2 a day. That portion has plunged to less than 10 percent of the world’s population now.

Every day for a decade, newspapers could have carried the headline “Another 170,000 Moved Out of Extreme Poverty Yesterday.” Or if one uses a higher threshold, the headline could have been: “The Number of People Living on More Than $10 a Day Increased by 245,000 Yesterday.”

Many of those moving up are still very poor, of course. But because they are less poor, they are less likely to remain illiterate or to starve: People often think that famine is routine, but the last famine recognized by the World Food Program struck just part of one state in South Sudan and lasted for only a few months in 2017.

Diseases like polio, leprosy, river blindness and elephantiasis are on the decline, and global efforts have turned the tide on AIDS. A half century ago, a majority of the world’s people had always been illiterate; now we are approaching 90 percent adult literacy."

"when parents are confident that their children will survive, and have access to birth control, they have fewer children. Bangladesh was once derided by Henry Kissinger as a “basket case,” yet now its economy grows much faster than America’s and Bangladeshi women average just 2.1 births (down from 6.9 in 1973)."
Related posts:

Why 2017 Was the Best Year in Human History

The World Is Getting Quietly, Relentlessly Better

The short history of global living conditions and why it matters that we know it

How Much Has Life Expectancy Improved?

Saturday, December 28, 2019

Egg market seems to act just the way supply and demand predict

Egg Glut Deepens Problems in Farm Economy: Shares in top egg producer Cal-Maine Foods take a hit, as per-dozen prices decline by Micah Maidenberg and Kirk Maltais.

This was from the WSJ on Sept. 30. Retailers passed their lower cost along to consumers and quantity increased. Excerpts:
"Jackson, Miss.-based Cal-Maine, the nation’s top egg producer, said Monday that prices for its eggs fell 30% to about 92 cents a dozen in its quarter that ended Aug. 31. The result cut Cal-Maine’s sales by 29%, year over year."

"Retailers have been quick to pass the drop in egg prices on to customers, eager to make more sales of a consumer staple. A milk glut has also encouraged retailers to cut prices on that standby"

"Purchases at retail stores rose 2.2% for the year through Aug. 10 from the previous 12 months"
If Cal-Maine saw its total revenue fall 29% when eggs prices fell 30%, that implies that the demand for eggs is inelastic, meaning he price elasticity of demand (Ed) is less than one.

That is the relationship that Ed has with total revenue. If P falls and Ed is less than one, TR falls.

> 1
> 1
= 1
No change
= 1
No change
< 1
< 1

Another way to see the relationship between price changes and changes in TR is to look at the price elasticity of demand and changes in TR.

If   Ed = % change in Qd   = 10/5 then  Ep  > 1
              % change in P

Now look at TR = P*Q. If P goes down 5% it would lower TR. But, since Q goes up 10%, if more than offsets the fall in Q and TR will rise. Notice in the table that if Ed  > 1, a decrease in price means an increase in TR.

Also, the % change in Qd (2.2%), is much less than the % change in P (30%). That would be an Ed much less than one (although that does not use the mid-point formula, which allows us to get the same numerical answer whether the prices rises or falls).

Friday, December 27, 2019

Awash in dirty plastic: We’ve got a big problem in our recycling market

By Michael Taylor of The San Antonio Express-News. Excerpts:
"plastic straws represent just 0.03 percent of American plastic waste that ends up in the ocean, according to Rachel Meidl of Rice University’s Baker Institute for Public Policy"

"the global market for recyclable commodities got a massive shock at the end of 2017, with the situation still evolving.

China announced a new program called “National Sword” in 2017 in which it would not import 24 types of waste, including many mixed paper and plastic products, starting in March 2018. A further list of 16 more items, including many metals, will be banned from import by the end of 2019."

"The China bans allow for the importation of “clean” plastics and metals, but it ceased the importation of what people in the industry call contaminated commodities, or mixed materials.

Even after the 2017 policy change, China remained open to highly pure or homogeneous paper, plastics and metals, but not the mixed, dirty and hard-to-handle stuff it had previously bought from the United States and Europe.

Underlying this China ban is the first key lesson of the economics of the recycling industry: Demand and prices are highly driven by the purity of the commodity.

Purity in this market means the homogeneous consistency of one type of resource. If a recycler can cleanly separate any secondhand material — whether it’s plastic, metal, paper or even glass — industrial buyers will pay a premium.

Mixed materials, by contrast, whether blended with other materials or contaminated by nonrecyclables or worse, go for the lowest prices, if they’re purchased at all.

By 2019, the tons of scrap plastic imported to China fell to less than 1 percent of 2017 levels.

Imports of plastic waste from the U.S. and Europe to Indonesia, Malaysia, Philippines, Thailand and Vietnam briefly quadrupled in 2018 as plastic exporters scrambled to find alternatives to the China market. But those Southeast Asian markets have proven unable to handle the volumes coming from the U.S. and Europe. Recyclers in the U.S. are now awash in dirty plastic, with no outlet for their commodity. Much of that is headed for landfills.

The price of products such as cardboard and what the industry calls “mixed paper” has also plummeted."

"U.S. cities that used to earn a profit on their recycling programs now lose money every month. Some cities have either cut back part of their programs or are considering doing so."
Related posts:

Has An Increase In Supply Reduced The Economic Value Of Recycling? (May 17, 2018)

As Costs Skyrocket, More U.S. Cities Stop Recycling (April 04, 2019)

What about all this plastic pollution? (June 17, 2019)

Thursday, December 26, 2019

U.K. Experience Suggests an Inverted Yield Curve Isn’t All Gloom and Doom

In the U.S., a drop in long-term yields below short-term rates typically portends a recession, but that relationship may be breaking down

By Anna Isaac of The WSJ. Excerpts:
"A widely watched U.S. recession signal has been blinking red for months now. Yet the performance of that gauge, the yield curve, in Britain suggests it is less worrisome than the American experience indicates.

This signal is a bond market phenomenon called an inverted yield curve, which means long-term government bond yields are below short-term interest rates. Since the 1970s, it has appeared before every recession. But in Britain, the yield curve has inverted without a recession, for reasons that might be at work in the U.S. bond market today. Indeed, it might explain why other data, such as the stock market, aren’t sending similarly downbeat signals.

Short-term rates are mostly under the control of the central bank, while long-term bond yields are driven by investors. Normally, long term rates tend to be higher than short ones, to compensate investors for tying up their money for more time, with all the additional uncertainty that involves in terms of inflation, economic growth and monetary policy.

But when investors believe there’s a recession coming, that relationship can flip. They flee to the safety of bonds over riskier investments such as stocks. When demand pushes the price of bonds up, their yields go down. Investors, in these circumstances, also expect the central bank to cut interest rates to try to counteract a weak economy. Such a step would restore the normal relationship. Every time the U.S. 10-year Treasury yield has sustained a drop below the three-month T-bill since the 1970s, a recession has followed. There have been no false positives."

"Investors typically expect government bonds to rise in value during a downturn as yields decline. With yields in Europe already in record-low or negative territory even before a recession hits, investors may no longer believe European bonds can act as a hedge against falling equity prices, said Scott Theil, managing director and deputy chief for fixed-income investment at BlackRock. They may be buying U.S. Treasurys for their better returns, helping nudge their yields below short-term rates.

That’s not all. The compensation investors receive for tying up their money in long- instead short-term bonds, is called the term premium. If investors see little risk of inflation climbing meaningfully in the future, they may accept a low or even negative term premium. That translates into lower bond yields and more frequent inversions of the yield curve."
Related post:

Many economic trends don’t fit with patterns that presaged previous recessions although warning signs can be sudden