Live Nation’s U.S. Monopoly Case

Answer the following questions to check your understanding of the story.

Of which illegal practice is Live Nation accused?

a) Rent Seeking

b) Tying arrangement

c) Predatory pricing

d) Exclusive dealing

Wrong! - The gap is negative, so it cannot be inflationary. 147 trillion yuan is the potential GDP, not the output gap.

Very Good! - Live Nation practiced exclusive dealing by requiring venues to sell tickets through its platform, preventing rival sellers.

Why might the live event ticketing market behave like a monopoly?

a) Live Nation created barriers to entry for new firms.

b) Live Nation is a natural monopoly.

c) Live Nation faces large sunk costs.

d) Live Nation faces competition from potential entry if other ticketing firms expect economic profit.

Wrong! - If entry were easy, Live Nation could not charge high fees. Since multiple firms could supply tickets at lower prices, the market is not a natural monopoly. Monopoly arises from sunk costs facing entrants, not the incumbent.

Well Done! - Many venues sell tickets only through Live Nation, preventing rival ticket sellers from entering.

How has the monopoly behavior in the live event ticketing market been addressed?

a) By removing barriers to entry

b) By eliminating the sunk cost Live Nation faces

c) By ending Live Nation’s natural monopoly

d) By raising the sunk cost potential entrants face

Wrong! - Reducing the incumbent’s sunk costs does not lead to market entry. Live Nation does not have a natural monopoly. Higher sunk costs discourage entry and allow monopoly behavior to continue.

Good Job! - Venues can now choose any ticket seller, ending exclusive dealing and allowing new firms to enter.

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