Arbitrage, Hannah Montana Style (Opinion)

Arbitrage is back in style, or was before the leveraged buyouts started falling apart. The best indication most of us had that the sale of Acxiom Corp. was in serious jeopardy was the spread between the price the buyers were going to pay and the price of the stock.

Getting almost as much ink these days is another type of arbitrage: ticket scalping. It’s been against the law in Arkansas since 1947, despite occasional attempts (including one earlier this year) to relieve law enforcement agencies of this burden.

In some parts of the country, scalping has always been a happy exercise in basic economics. You buy a ticket to an event that turns out to have more demand than supply, so you decide you’d rather have the extra money than entertainment.

The advent of online ticket sales has muddled the process, both in jurisdictions that allow scalping and those that outlaw it. The current concert tour by teen phenom Miley Cyrus and her alter ego, Hannah Montana, is a case in point. Ticket arbitrageurs are using very clever software to circumvent the protections that are supposed to level the playing field for online ticket buyers. Selling out within seconds is now becoming commonplace for the most popular acts. 

Arkansans who weren’t able to get face-value tickets to her Dec. 1 show at Alltel Arena are now at the mercy of scalpers.

Attorney General Dustin McDaniel, father of a young daughter, wishes he could “fix this problem for all the parents with disappointed kids right now.”

Well, that’s one way to employ the AG’s resources. We can think of better. In fact, we’re inclined to think that anti-scalping laws are a waste of energy and may be un-American. Unlike payday lenders, scalpers aren’t enticing buyers into a financial black hole. Scalpers are merely taking advantage of market forces on a strictly non-essential luxury item.

A big part of the blame rests with Hannah Montana’s promoters. Attempts to keep the ticket prices “affordable” have backfired, instead making it affordable for scalpers to buy up huge blocks while creating the opportunity for a profit margin of 800 percent or more. If the tickets had been priced at, say, $100 to $150, the scalpers would have had to pony up two or three times as much for a much smaller potential margin. The risk of overbuying and overpricing would outweigh the potential reward and Hannah Montana futures would return to some sort of reasonable level.

And yes, some kids would still be disappointed. That’s a market reality, too.