Taylor Swift priced her Eras tour tickets with average face value of $253.56. But due to higher demand than available supply, the average resale ticket went for $3,801. In-demand restaurants are following a similar trend: platforms like ResX and Cita offer marketplaces where you can buy and sell a restaurant reservation. Want to go to celebrity-laden Carbone or Italian hotspot Lilia? That will be $200–600. Before food.

Demand is clearly outstripping supply — why don’t brands simply raise prices to get the profits for themselves?

The line out the door of the restaurant is both a signal of over demand and its driver. Imagine you’re heading to meet a friend, and you see a line of people on the street for a new restaurant. Then you hear about the crashed Taylor Swift Ticketmaster website. And suddenly, without meaning to, you start to consider these yourself. Should I try to get a reservation there? Is the concert really that good?
The virtuous cycle of under supply and over demand
There are restaurants who do raise prices to meet (or outstrip) demand. The $214 grilled cheese at Serendipity3. The $180 Wagyu sandwich. Why doesn’t everyone price this way? Well, that’s a perception choice. Restaurants want to be enduring. The $214 grilled cheese is a stunt. For Taylor Swift, families attending is part of the mystique. We want to see Dads bringing their daughters to the show. If Taylor had priced every ticket at $1,000, we’d see her as greedy. Worse, prices might decline on the secondary market, and the public would consider the tour a failure. Cue the vicious cycle.
Meeting demand is a risk for brands

Consolation Prizes

Concerts and restaurants have built-in scarcity. There may simply never be enough supply to meet demand. The smartest thing is not to raise prices (loss of aura), but to sell cheaper derivatives of the main product. In this way, scarcity dealers get to have their cake and eat it too. Taylor Swift’s Eras movie is a perfect example. The film has significantly higher supply than the in-person concert — it can be watched in theaters, sent to streaming services, and re-seen hundreds of thousands of times. The over-demanded concert is now a marketing strategy for the film.
Source: NBC News
Lilia sister restaurant Misi does not just sell small Italian plates in-person (limited restaurant seats cap its earnings). It now sells its own pasta and ricotta for making your own ricotta toast. NYC cult restaurant Rao’s (just try to get a seat) recently sold its pasta sauce business for $2.7 billion to Campbell’s soup.
Source: Misi Pasta Instagram

Raising prices to meet demand? A fool’s errand. Using over demand to launch new businesses? Genius.

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