Government Intervention Vs Free Market Mechanism: A Case Study of Ticketmaster’s Market Power (Essay Sample)

Government Intervention Vs Free Market Mechanism: A Case Study of Ticketmaster’s Market Power By Student’s Name Course Details Instructor’s Name University’s Details City and State where it is Located Date of Submission Government Intervention Vs Free Market Mechanism: A Case Study of Ticketmaster’s Market Power Economics plays a pivotal role in price and market regulation in any industry. The price mechanism, a fundamental principle that ensures the efficient allocation of scarce resources, achieves the role of market regulation by allowing the demand and supply paradigm of the market to interact. The interaction of the demand and supply in the market ensures that equilibrium prices are established, which govern the market decisions made by the businesses and the consumers. Three essential functions, which include rationing, incentivisation, and signalling, are achieved through the fair interaction of the demand and supply dynamics. The achievement of these functions ensures that resources are fairly distributed to maximise economic efficiency and customer satisfaction. However, market dominance and monopoly power like the one exhibited by Ticketmaster and Live Nation drastically alters the efficiency of resource allocation and customer satisfaction in the live music ticketing sector. Ticketmaster has dominated the live music ticketing industry, contributing to the company charging exorbitant service fees. The company owns approximately 70% of the Live Music ticketing market share in the US and UK (Lorsch 2023). The enormous market share has enabled the company to set its prices and charge high service fees -up to 75% of the ticket’s face value, leading to customer dissatisfaction (Perkins 2023). Also, the company owns most of the secondary resale market, which has led to hoarding of the tickets in the primary market and later selling the tickets on the secondary market at highly exaggerated prices. Lack of accessibility and charging high prices have led to most consumers complaining and dissatisfied, signalling inefficient application of price mechanisms. To ensure a pragmatic application of the price mechanisms, the government should interfere and implement measures to ensure economic efficiency and customer satisfaction. The rationale for Government Intervention Ticketmaster and Live Nation's unorthodox behaviour of charging exorbitant service fees, denying accessibility to tickets to customers, and competition practices which hinder entry for other ticketing companies provide the rationale for government intervention. The monopoly status exhibited by Ticketmaster enables the company to indulge in practices that hinder customer satisfaction and the efficient allocation of resources in the market. The prices in the market should correspond to the marginal cost, which would ensure that there is fair distribution to all consumers. Monopolistic pricing, such as the one possessed by the Ticketmaster, skews the process. Therefore, to ensure efficient resource allocation and customer satisfaction, it is pragmatic for the government to intervene to provide plausible measures. Also, high service fees charged by Ticketmaster act as a barrier for low-income earners to attend social activities. The low-income earners live under a tight budget and, therefore, cannot afford exorbitant service fees for events such as Taylor Swift's tour. Also, low-income earners are not in a position to purchase tickets when listed in secondary resale markets due to their exaggerated prices. Ticketmaster has been accused of making it hard to acquire tickets on the main website and then listing the tickets on the secondary markets at exorbitant prices. The behaviour makes it hard for low-income citizens to obtain those tickets and participate in social events, alleviating economic disparity. Hence, governmental intervention is vital to establish ethical standards that promote the effective allocation of resources and consumer satisfaction. Additionally, analysing the Ticketmaster’s dominance raises concerns about equality and consumer welfare. Since acquiring a ticket by one individual does not impact the probability of another individual acquiring a ticket to a given event, the ticket issuing is considered a public good. Therefore, the malpractices exhibited by the company may be viewed as an attempt to hinder consumers from accessing a public good. Hence, to ensure equitable allocation of public resources, government action is necessary in the ticket sector to ensure all consumers have equal opportunities to participate in social events, irrespective of their financial circumstances. Forms of Government Intervention The government should implement anti-trust and regulatory measures to prevent Ticketmaster from exploiting its market hegemony. Ticketmaster has faced allegations of using its market power to establish exorbitant service costs and experiencing website crashes. These issues have resulted in customers being unable to get tickets or being forced to purchase them at inflated rates on Ticketmaster's secondary retail marketplaces (Sisario 2023). The government should initiate regulation measures which ensure price limitation and cap the service maximum fee to a friendly price that all consumers can afford. Also, the government should indulge in anti-trust measures, dismantle monopolies, and eradicate mergers such as the Ticketmaster and Live Nation merger, which hurts the consumers. Government regulation and anti-trust measures will be sought to expand customers’ choices, reduce ticket costs, and boost market efficiency by fostering competition. Also, the government should offer public funding and subsidies for live music events performances to guarantee accessibility and affordability to all consumers. The high ticket cost is due to the government's high taxation on the music and events industry (Ivanova 2023). Therefore, the government should provide subsidies, cover costs, and fund some public events. This action will result in more organisers having an equal market share as the tickets’ prices will be the same, reducing Ticketmasters’ dominance. Arguments for Minimal Intervention Despite the benefits of government intervention, it will also pose threats that will interfere with market efficiency. Businesses such as Ticketmaster make changes to react to customer choices and market signals. Therefore, Ticketmaster's price changes may be in response to familiarity, ease of use, and access to a wide variety of events provided by a single platform. This implies monopolistic tactics result from customer choice rather than an innate market failure necessitating government intervention. Also, excessive regulation impedes competition and innovation. The government should have minimal intervention in the market dynamics as its involvement has the potential to inhibit innovation and growth of that industry. Overly intrusive government intervention measures could reduce investment and innovation in that industry. Most investors are attracted by enormous returns to inves...