Stop me if you’ve heard this one before. A geek and an outdoorsman walk into a bar. What are they doing frequenting the same joint? Who knows. But they get to talking and they hit it off! Turns out, they have more in common than they thought. Specifically, they both have a passion for well structured markets.
You see, in both of their spheres, they face high demand for scarce resources. As overhunting can drive certain animals to extinction, the government where they live has decided to limit the number of animals that can be hunted. Outdoors enthusiasts can purchase special permits (such as deer tags) for the right to hunt, but these are limited in number so as to protect animal populations. Likewise, the San Diego Comic Con hosts vendors who boast exclusive collectibles that will only be sold at the convention itself. As these are certain to sell out, they need to determine who to sell their goods to.
The geek and outdoorsman both know that money talks, and that auctions are generally the most efficient way to allocate goods to those who value them most. By definition, only those who are willing to give up the most for the goods will be the ones who walk away with them. But in a world where ammunition and anime posters are expensive, the most common of hunters and geeks aren’t able or willing to pay top dollar just to participate in something they love. There must be another way!
That is where well structured markets come in! While auctions may be the most efficient in terms of profit maximization, it certainly doesn’t do any favors to customers’ satisfaction. Instead, both the hunting and comic convention markets utilize a lottery-style system. Under this system, a firm can make sure that all who are interested get a fair (or weighted) shot at participating, and all exclusive goods (collectibles or tags) are distributed. While this doesn’t deter price scalping in the first place, it does mean that those who stand to gain the most are not able to pay the most to get the goods in the first place, reducing the likelihood that honest participants need to enter the secondary market. It is often believed that prices are the best way to signal how to allocate goods/resources and that institutional interference can cause inefficiencies, but in the case of lottery systems for SDCC and hunting season, alternative methods actually promote more satisfaction for more consumers.
Delighted by the unlikely connection, the geek and the outdoorsman begin a lifelong friendship, and all thanks to some creative economic thinking.
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