Last week the restaurant chain Olive Garden offered a limited supply (1,000) of pasta passes (the “Never Ending Pasta Pass”) for $100 that entitles diners to unlimited pasta at any Olive Garden restaurant nationwide during an upcoming seven-week period (September 22 to November 9), along with unlimited Coca-Cola, soup, salad and breadsticks. The pasta passes sold out immediately and guess what? The market value of seven weeks of unlimited pasta is apparently worth a lot more than $100 and there is now an active secondary market on eBay. The graphic above shows one completed auction for a Pasta Pass that had 23 bids and sold for $185.98. Other completed bids show the Pasta Passes selling for $180, $186.31, $191.50 and $175, so the market price seems to be converging at an average price of about $180-$185. Olive Garden is now saying that the pasta passes are not transferable and it’s trying to stop the secondary sales on eBay, but I don’t think that strategy is working because there are currently 26 listings on eBay for the pasta passes. Washington Post reporter Caitlin Dewey provides some sound economic analysis of the situation in her article “Olive Garden’s unlimited pasta pass ‘black market’ is actually a perfect illustration of why ticket-scalping works“:
Essentially, secondary markets develop to balance discrepancies between supply and demand, as created by the original ticket-venders. In this case, there are a limited number of Olive Garden pasta passes; the demand is high enough that people will pay incredible amounts of money for them; and yet — in its effort to generate social media buzz — Olive Garden sets the price point well below what the market is willing to pay. A mere $100 for seven weeks of pasta? That’s absurd. A plate of Olive Garden pasta is usually around $13. Even if you only use the pass three times a week during that period, and get one plate of pasta each time — which, let’s be real, does not even begin taking advantage of the deal — the pass is worth $273. At least. This, in essence, is the dirty economic secret of scalping, whether we’re talking about pasta or Beyonce tickets or anything else: Concert promoters and other sellers are quick to blame the scalpers for inflating prices, or companies, such as eBay and Craigslist, for failing to police them. In reality, the best way to stop people from reselling things is to charge more for those things to begin with. In an unsuccessful attempt to preempt the secondary market entirely, Olive Garden included a line about non-transferability in its pasta pass’s fine print. At the end of the day, though, there’s an easier solution: actually charge what people are willing to pay. For the pasta pass, that looks to be roughly $300.
MP: As I have pointed out many times before, we shouldn’t blame “tickets scalpers” for high prices on the secondary market, we should blame those who actually have direct control over the supply of tickets (or pasta passes) and the price of tickets (or pasta passes) – the sellers (artists, promoters, venues, sports teams, theaters, Olive Garden, etc.). There are only two reasons a secondary market exists for tickets (or passes) selling above face value: a) the sellers have under-supplied the tickets (or passes) relative to the demand, and/or b) the sellers have under-priced those tickets (passes) relative to the market price. If sellers want to eliminate the secondary market for tickets (passes) above face value, they can easily do that by increasing the supply of tickets (passes) and/or raising the price. In other words, the key factors: supply and price, are completely under the control of the sellers, and they therefore shouldn’t be blaming “ticket scalpers” and secondary markets when those markets only exist because of the sellers’ actions: under-supplying and/or under-pricing tickets/passes. Q.E.D.