"Scalping Law Trims Wallets Of Knick Fans," by John Tierney New York Times (June 3, 1999)

(Article is accessible via Lexis-Nexis.)

IF you wanted to see the Knicks play the Pacers in Indianapolis Tuesday night, you could have bought a seat for $65 from a ticket broker. But if you'd like to see them play this weekend in Madison Square Garden, expect to pay at least $250.

One possible explanation for this price difference is that New York is a much bigger city with more affluent fans competing for seats. But you find a similar gap even when you compare New York with Los Angeles, another metropolis with lots of wealthy fans.

During the first two rounds of the basketball playoffs, when the Lakers were still in contention, brokers were selling tickets to games in Los Angeles for $50. The cheapest seats available in New York during those earlier rounds cost three to four times as much.

Why so much more? Perhaps the main reason is that so many politicians are determined to protect us. Unlike California and Indiana and most other states, New York outlaws ticket scalping, and Attorney General Eliot L. Spitzer has just issued an inch-thick report demanding even stiffer penalties for scalpers.

New York's law, which was renewed this week by the Legislature, makes it illegal to resell a ticket for more than 10 percent above the face value. Ticket brokers have evaded the law by operating in New Jersey and Connecticut, but they still run the risk of prosecution if they make a deal with anyone in New York. These restrictions on the legal flow of tickets have fostered black market practices and prices.

By contrast, people in Los Angeles and Indianapolis can resell tickets for whatever they want, so the holders of season tickets to Laker and Pacer games can readily profit by selling their playoff seats to brokers. And although the brokers are legally free to charge astronomical prices, there are so many tickets on the open market that they cost less than in New York.

"The more you allow tickets to be openly traded, the more you'll see prices come down," said Stephen Happel, a professor of economics at Arizona State University at Tempe. He has seen this process firsthand in Phoenix, where he helped persuade the authorities to establish areas outside sports arenas at which licensed brokers, street scalpers and fans can sell tickets on game day at any price they want.

"New York is such an anomaly," Dr. Happel said. "Right there under the shadow of Wall Street, you're trying to turn people into criminals for buying and selling pieces of paper that are essentially no different from call options. But you can't defeat the laws of demand and supply. The more restrictions you put on selling tickets, the more you'll drive up prices, and the more you'll encourage hard-core criminals to get in the business."

The criminal results of the current law are amply documented in the report issued last week by the Attorney General. His investigators took more than four years studying brokers and box office employees to discover what was already known by economists and citizens of the old Soviet Union: when you fix the price for something below its market value, people will pay bribes to get their hands on it.

THE report says the widespread corruption should be combated by classifying box office bribery and ticket scalping as felonies. (They are now misdemeanors.) But why not eliminate the crime wave by eliminating the crime? In an interview, the Attorney General was asked why a ticket broker shouldn't be as free to set prices as, say, a real estate developer like Mr. Spitzer's father.

"You could make a theoretically powerful argument in favor of lifting price controls on tickets," Mr. Spitzer said. "But a legislative decision was made to impose the controls, and that has created an attendant problem of commercial bribery. All we're trying to do is eliminate the bribery that has become endemic in the ticket industry."

Mr. Spitzer did have some words of encouragement for New Yorkers who would like the same freedom to buy tickets as people in other states. He suggested that box offices at arenas and Broadway theaters could start selling market-priced tickets on the Internet.

"Perhaps they could eliminate the middleman," Mr. Spitzer said, "and auction off tickets on Ebay directly to consumers."

The idea is intriguing, but it's hard to imagine the local box offices doing anything so creative very soon. For now, the cheapest way to see the playoffs is to drive to Indianapolis.