Sunday, August 30, 2009

Scalping in the Age of Craigslist

Writing in The New York Times, Ben Sisario has an eye-opening piece on online ticket scalping. Among the revelations:
• Miley Cyrus' upcoming tour will use paperless ticketing and require photo ID, moves intended to prevent the reselling of tickets. Scalper Don Vaccaro called it "a career-ending situation" -- for Miley Cyrus, that is.
• One recent report claims that 40 percent of tickets sold on online resell sites go for face value or less.
• Many online sites exaggerate their inventory. They advertise tickets owned by other online sites; in the event of a sale, both sites share in the profit. The consumer never knows who he's buying from.
• When popular shows sell out within minutes, it "educates" buyers to bypass official channels:

David Kronstat, a 43-year-old music fan in New Jersey, said he hasn’t placed a Ticketmaster order in years “because of how convoluted the whole ticket-buying process has come.” Instead he scours Craigslist, trying to avoid brokers by looking for telltale signs of ordinary Joes motivated to sell. “There’s always some guy who bought four tickets and can only use two, or can’t get a baby sitter,” he said. (When told about those lines, one broker said, “That’s all stuff that I write on Craigslist.”)

Friday, August 28, 2009

Answer: Who Paid for the Beers?

Most people reason that, since the man is getting something for a net cost of nothing, it is the bars that are being cheated out of beer. Another answer shifts the cost onto the banks or exchange companies. But the banks are not offering these exchange rates as an act of charity to border-town alcoholics. (Very little that banks do is an act of charity, actually.) They presumably have a reason for offering these rates. The best answer to the puzzle is that the man earns his beers by returning currency to its issuing nation.
Look at it this way. An alien walks into a bar and tries to buy a drink with an Alpha Centauri zlorqat. “Whoa, buddy!” says the bartender. “Pay up in American money or vamoose!” The bartender has a point. He will not be able to spend an Alpha Centauri zlorqat on earth. It is not general knowledge on this planet that there is intelligent life on Alpha Centauri, much less that they have an economic system based on a currency answering the description of what the alien has offered. The “culture of belief” in the value of the Alpha Centaurian zlorqat does not reach this far. To spend a zlorqat, the bartender would either have to travel to Alpha Centauri or find an exchange company or currency trader willing to make the trip for him. Both alternatives will be expensive, if not impossible.
The value of the U.S. dollar also diminishes beyond the U.S. border. It does not diminish much, given that it is a benchmark currency of a global economy. Still, it is sometimes difficult to find somebody willing to accept a U.S. dollar outside the U.S. There are situations where a U.S. dollar will not be accepted at all. This diminished spendability is reflected in the lower rate offered for U.S. dollars outside of the country. The Canadian bartender in the story is effectively saying, “We know this U.S. dollar is worth as much as a Canadian dollar, but it’s occasionally a hassle to spend it here. We’ll pay you ten cents to take it back to the U.S., where it will regain its full value.” This is how the man earns his beers.
Conceptually, the situation isn't so odd. Every country overvalues its own currency, compared to how it’s valued elsewhere. This near-universal fact is simply more apparent here because (a) the U.S. and Canada both happen to call their currency dollars and (b) the two are worth approximately the same. The puzzle is unrealistic, however, in that order towns with open borders rarely observe the official exchange rates. In a community where both U.S. and Canadian dollars commonly circulate, and where you can walk across the border without passing customs, it’s likely that everyone would value the two currencies at parity.

Tuesday, August 18, 2009

Who Paid for the Beers?

There was a time when U.S. banks valued the Canadian dollar at $0.90 American, and Canadian banks returned the favor by valuing the U.S. dollar at $0.90 Canadian. This inspired the following puzzle. I’ll give my answer next week.
A man walked into a bar in International Falls, Minn., U.S., and ordered a 10-cent beer (such was the price at the time.) He paid the bartender a U.S. dollar and a got a Canadian dollar in change (for of course both currencies freely circulate in the cosmopolitan community of International Falls.) The man then walked across the border into Canada, ducked into another bar, and ordered a beer. It too cost 10 cents (Canadian). The man paid by giving the bartender the Canadian dollar he’d been given, and got a U.S. dollar in change.
You get the picture. The man then went back to the U.S. side, bought another beer the same way, then returned to the Canadian bar. By the end of the day, he was falling-down drunk, with $1 American in his pocket.
Who really paid for the man’s beers?