How dynamic pricing works – and how advertisers may have driven up prices

Tickets for Oasis in 2025 went on sale at the end of August. Few will have missed the news that the 17 concerts in the UK are sold out.

When I searched for it, the Ticketmaster website advised me to “Please check back later as more (tickets) may be released.” How would more tickets be released? Wembley’s capacity cannot be increased. Are additional concerts planned? Have tickets been held back from sale?

Many fans who were lucky enough to be at the front of the queue expected to pay around £135 for a ticket, only to find that the price had risen to over £350 because the tickets were “hot”. Many fans did not expect the price to rise so much while they were waiting in line.

Ticketmaster justified the change by citing “market value” and some believe the strategy is aimed at deterring ticket black marketeers. Following the row, the government said it would look at this so-called dynamic pricing as part of a wider consultation in the autumn.

The Competition and Markets Authority (a British regulator) and the European Commission are also investigating.

In a market economy, market prices play an important role in balancing supply and demand. Only consumers who are willing (even if reluctant) to pay the market price can purchase a product such as a concert ticket.

Companies can adjust their prices to increase their profits. If a product is selling slowly, it may be an indication that the price has been set too high. Lower prices could increase sales and profits. If a product is selling quickly and supplies are running low, companies can increase their profits by raising prices.

While we’ve become accustomed to dynamic pricing, it’s rare that prices change so drastically (and not while we’re waiting in line to buy).

Pricing in uncertain demand

In markets where demand is uncertain, prices adjust over time. For example, each flight of an airline has a fixed capacity and demand is uncertain. For this reason, most airlines (and hotels) have automated systems to implement dynamic pricing.

With each booking, seats become scarcer and the likelihood of the flight being sold out increases. Airlines have an incentive to raise prices to maximize revenue from the scarce seats. Or, if seats aren’t sold for a while, the likelihood of the flight being sold out decreases and airlines can lower the price. Therefore, it can sometimes be beneficial for a passenger to book later.

The same applies to the sale of concert tickets. In the case of the Oasis tour, the organizers were perhaps initially unsure of how high the demand was. But as the queue for tickets quickly grew longer, the uncertainty dissipated and ticket prices rose.

The fact that the Oasis concerts sold out so quickly suggests that some consumers were willing to pay the market price but were unable to purchase tickets. Rather than adjusting the price over time to balance supply and demand, the rare tickets were obtained by those consumers who got to the front of the queue fastest.

However, a key difference between a concert ticket and an airline ticket is that an airline ticket cannot be resold in principle. However, with concert tickets, resale is a common practice. This leads us from market uncertainty to a second explanation for dynamic pricing: price spikes or price discrimination.

Ride-sharing services like Uber regularly practice price gouging by temporarily raising prices when demand is high or there is a shortage of drivers. Price gouging is an example of what economists call price discrimination: the practice of selling two units of the same good at different prices.

Price discrimination and profits

During price spikes, the price a consumer pays depends on the timing of their purchase. Price discrimination is profitable for companies. No consumer likes to pay more, but by price discrimination, companies charge more to consumers who are less price sensitive, increasing sales and profits.

But there are winners and losers. Consumers who are flexible or price-conscious tend to pay lower prices. And consumers who are tied to their tariffs and are less concerned about price pay more because of price discrimination.

One way concert promoters can achieve this is to delay ticket sales until shortly before the concert and then sell the tickets at a higher price than in the first wave. Or, as we have seen, to increase prices when the first wave of sales is already underway.

And if concert promoters don’t do it, ticket sellers can. In the case of Oasis, the official resale of tickets is handled through the Twickets website, with customers paying face value plus a fee of up to £25 per ticket.

However, a number of ticket purchases were clearly the responsibility of black marketeers, who were selling their tickets for up to £6,000 immediately after they went on sale on websites such as Viagogo and Stubhub. The band have since warned their fans not to buy these tickets as they could be cancelled, but for many the damage has already been done.

By increasing demand, they increased the price for everyone – except for the lucky few who were able to secure their tickets at the original offer price.

This article is republished from The Conversation under a Creative Commons license. Read the original article.