Tag: Swifties

Image generated by GTP-4o of a woman singer performing at a concert.

The answer to the question in the title is “yes” according to a column by James Mackintosh in the Wall Street Journal. In the Apply the Concept “Taylor Swift Tries to Please Fans and Make Money,” in Chapter 11 of Microeconomics, we discussed how for her The Eras Tour, Taylor Swift reserved more than half of the concert tickets for her “verified fans.” The tickets sold to verified fans for an average price of $250.

On the resale market, prices of the tickets soared to $1,000 or more. Yet only about 5 percent of tickets purchased by verified fans were resold. Mackintosh’s wife and “eldest offspring” were in in the other 95 percent—they had purchased their tickets at a low price but wouldn’t resell them at a much higher price. Moreover—and this is where Mackintosh sees economics as breaking—if they didn’t already have the tickets they wouldn’t have bought them at the current high price.

Not being willing to buy something at a price you wouldn’t sell it for is inconsistent behavior because it ignores a nonmonetary opportunity cost. (As we discuss in Chapter 10, Section 10.4.) If Mackintosh’s wife won’t sell her ticket for $1,000, she incurs a $1,000 opportunity cost, which is the amount she gives up by not selling the ticket. The two alternatives—either paying $1,000 for a ticket or not receiving $1,000 by declining to sell a ticket—amount to exactly the same thing.

Mackintosh recognizes that the actions of his wife and offspring reflect what he calls a “mental bias,” which he correctly labels the endowment effect: The tendency to be unwilling to sell something you already own even if you are offered a price greater than the price you would be willing to buy the thing for if you didn’t already own it.

As we discuss in Chapter 10, the endowment effect is one of a number of results from behavioral economics, which is the study of situations in which people make choices that don’t appear to be economically rational. So, Mackintosh’s family—and other Swifties—didn’t break economics. Instead, they demonstrated one of the results of behavioral economics.