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"Just raise the price" is an appropriate response to demand for a commodity, but it's an inappropriate response to these scenarios.

For example: PAX is trying to build a community event. The target demographic is not "wealthy people who love games", it's "people who love games" Changing the price results in a different convention.

Similarly, a popular $20 restaurant can't double their prices to keep demand manageable, because a great $20 dinner that costs $40 will reduce the perceived quality of the restaurant.

If PAX or anyone else wants to intentionally price something so that the demand is larger than available supply, then in any case the "effective price" will be raised so that supply matches the demand.

In effect, part of the "effective price" will be the monetary cost, and the other part of the price will be wasted time/emotions/connections/whatever that discrimiminates those who get the ticket from those who don't. This is basic, well researched economics, with plenty of real life examples in various countries, regimes and industries.

The common options include:

a) $x + significant time spent waiting in line - some wait in line and get nothing; some value their time a lot and don't attempt buying.

b) $x goes to the original supplier, $y goes to scalpers/touts/your employee bribes - the stuff gets sold at money market price, but someone else gets the difference;

c) lottery - either intentional lottery, where everybody has a chance of getting a ticket for $x despite that it's market worth is >$x; or an unintentional lottery, where random factors (showing up at the right time, getting a reservation that someone else cancelled) determine if you can or cannot get the ticket. In both cases, the "buyer" might be motivated to resell it if possible, since it's possible that he paid $20, he wouldn't go if it cost $100, but someone else wants to pay $100, so ...

d) (ab)use of advantages - political connections, bots, whatever; you buy at $x and sell at the market price.

In any case, (most) buyers don't get the intended effect of cheaper price; but the seller loses out. Only the middlemen benefit, without adding value. (In one sense, they add back the value that the seller reduced by mispricing)

I've seen what happens in USSR when the majority of economy functions this way - trust me, in most cases raising the price is actually the appropriate response; because otherwise there is so effing large amounts of effort&resources that is wasted - the seller gets $x, but the buyer anyway spends "market price" of $3x to compete with other buyers by giving $x of cash and $2x of wasted, unproductive effort.

It seems to me that the effective price would never fully bring it up to the money market level, and that difference is what makes it worthwhile to choose that strategy?

In the example of (a), there is no middleman, and the set of buyers becomes biased toward those who are dedicated over those with more money, because they intentionally distributed the effective price over multiple...payment channels (? I'm not much of an economist). Edit: actually there is a middleman; I recall the Wii launch, where I knew a guy who waited in line just to sell them on eBay. But still, there are "true fans" waiting who might be priced out at market value.

In the lottery style where tickets go on sale at x time and it's a free-for-all, some significant percentage of this round of sales will go to people that "deserve" them and get to enjoy a reasonable price with negligible non-monetary cost. Yes there will be some money lost to scalpers, but this can be reduced by forcing resellers into an official exchange channel where the original seller gets a cut.

Burning Man is an event where demand has exploded over the past few years and the supply cannot keep up. The organizers are also very concerned about getting the right people the tickets without jacking up the price. They have evolved a somewhat complex multi-pronged approach with lotteries, high-price presales, and a homegrown exchange system (STEP), where I believe they mandate reselling at face value.

edit: On second thought, I have neglected the cost of the people who expend time/effort and miss out completely. But, I still think there are benefits to pricing below market value with a sufficiently robust strategy.

There's this thing here in Copenhagen: http://www.goldentable.com/restaurants-copenhagen/

A number of top restaurants (otherwise booked, on a Saturday night, for 2 weeks) auction off a single table, where 50% of the proceeds go to the restaurant, and the rest to a foundation for gastronomical research.

Another approach is to require a credit card and charge almost the price of a full dinner if you don't show up. The 41 in Barcelona goes one step further and makes you pre-purchase the entire meal.

Some guests will spend another $300 on an expensive bottle of wine. I think it's fine to let some people pay extra in advance to be guaranteed to get a table.

Alinea and Next in Chicago both use a pre-purchase ticket approach. They also open up tickets on a monthly basis a couple weeks in advance, and all the reasonable times are gone basically immediately. And both are far from cheap places.

The result of pricing too low for demand is ticket touting, e.g.: http://www.ebay.com/bhp/pax-tickets

I don't understand why the solution, at least in PAX's case, is not to ban bots. That would open up purchasing to regular human users, and since PAX is a ridiculously popular event, tickets would still sell out.

How do you ban bots with out implementing an arcane, clunky, painful, expensive manual system?

PS: your answer isn't allowed to be captcha.

You don't. I'd much rather suffer through a captcha than have the tickets/reservations sell out in seconds.

Yeah, pretty much this. PAX is a huge, widely popular event. It has an entire community built around it. I suspect that the vast majority of people would not mind filling in a captcha if it means they will have a much better chance of hanging out with friends they made in previous years' PAXs.

Perhaps the reason your answer is not allowed to be "captcha" is that there are numerous services that provide manual captcha answers for bots.

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