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Comment by a2tech | Hacker News Reader

Blame scalpers. I work on a small time website that happens to sell limited release shoes occasionally. Its almost impossible to keep the site functional during these releases because the buying bots are both aggressive and smart. They HAMMER sites trying to get at those shoes. Its nuts.

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Why not raise the price to whatever the scalpers charge or sell them on an auction instead of selling them so far below market value? If you for some reason don't want to make more money, you can donate the difference to charity. You could also do things like giveaways to previous customers or make them prizes in competitions, etc.

That will just raise the market price, scalpers will keep scalping and overall sales will decline.

Wait, what? Isn’t the price set by what people are willing to pay?

If scalpers can get $1000, that means people will pay $1000; if the scalpers could get $2000,’that’s what they’d charge.

So if Nike raises their prices to $1000, I don’t see how that increases market price.

Scalpers destroy markets by injecting excess capital in the marker and creating a false price floor. The issue with scalpers is they quite often get left holding the bag, and/or hold the product for a long period of time lessening the actual demand or excitement about the product in the first place.

From what I've seen they tend to move away from markets where there's not room to make a profit, eg no arbitrage. The gp is suggesting to find that price... Or make more.

This really doesn’t make economic sense to me. Any published papers on how this is supposed to work?

I think you’re saying auctions are less efficient for allocating goods and capital, which is contrary to everything I ever learned.

Look at what happened to CSGO skins. I believe the effect is studied under behavioral economics, but don’t quote me on that

I’m not sure what you’re talking about. In this case they’re not destroying anything, they’re simply performing arbitrage because of price inefficiency.

> That will just raise the market price, scalpers will keep scalping and overall sales will decline.

This is not true. Market price will not go up arbitrarily. Scalpers will not keep scalping if the retail price is greater than what they can sell it for, which will happen at some point.

I'm not sure how you're avoiding the "sales decline" part.

Why do you think sales will decline? The difference is who makes the profit. If Nike increases prices then profit shifts from the scalpers to Nike. The same number of shoes are sold for the same market prices.

Why should they?

Someone buys this stuff for the prices of the scalpers.

So someone will buy this stuff. Maybe it just takes longer. But I guess not even that.

> This is not true. Market price will not go up arbitrarily. Scalpers will not keep scalping if the retail price is greater than what they can sell it for, which will happen at some point.

How are you using such confident language on what the scalpers in this space will or will not do base on ... what looks like Econ 101 supply / demand curves? Do you have some expertise you're not including as context here?

Yeah this a fair point, I’m coming off way too confident on a complicated topic. I’d revise my comment to say:

I think this is not true, which can be seen if you make 2 basic assumptions: 1. Scalpers want to make money and 2. There is a max price people are willing to pay for shoes. Then there will be some price Nike can set which will cause scalpers to leave the market.

Why not put it on the auction in the first place ?

The company wants everyday people to participate in what is essentially a lottery. It's the psychology of them being priced at that level, giving them away wouldn't have the SE effect.

Similar with music tickets. Maybe musicians want everyday people to afford going to their shows, even if the market demand would price out many of them.

There's a variety of second-order consequences that aren't addressed by simply trying to price out scalpers/capture excess willingness to pay.

unethical_ban lists some of them.

There are others. For example, it is psychologically quite different to have scalpers say change prices every day or even every hour than to have a large company change prices every day or every hour for the same product. You can have considerable customer ire directed at the company in the latter case.

In a similar vein to what unethical_ban said about lotteries for everyday people, the hype that a company builds with products at "everyday prices" just in limited quantities is different and targets a different audience than products that are priced at luxury prices, even if the product on a secondary market commands the luxury prices.

Simply changing the price to try to deal with scalpers is an extraordinarily blunt tool that can run counter to many other priorities a company might have.

Part of if luxury good appeal is that that proof of work creates additional value. For example if you had be the first to solve a complex puzzle, wait in line for 24hrs or even have the fastest bot to get the item. That creates hype and adds to brand value.

Nike then cashes out that value by making partner stores Buy their shitty products to get a chance to score the good stuff

Vendor agreements force fixed prices

There's a 2013 NPR interview with Kid Rock about the comparable problem of concert ticket scalping prices. His solution: do more shows in popular cities to satisfy demand; reserve a few premium seats and price them at scalping market prices so he's making a good overall profit; and (not applicable to shoes) bind the ticket to the buyer and require ID at the door.

https://www.npr.org/sections/money/2016/04/20/475023002/epis...

Why don’t you just use a different distribution mechanism that prioritizes existing customers? Real buyers can’t beat the scalpers anyway. There is no bot protection that works. Even if it did scalpers can checkout faster and make more attempts than your regular users using manual methods.

Based on your experience, do you think dutch auction or reverse-dutch auction is a viable soft mechanism for beating bots?

What is reverse-Dutch auction?

Absolutely, but it misses the point. The bots are a feature not a bug. They create scarcity and improve brand value but only to a point. You can’t have them be 100% of the market but 75% is probably ok

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