The Super Bowl market

This weekend the 56th edition of the Super Bowl is played, the second most-watched team-sports event in the world (behind only the UEFA Champions League final). In it, the NFL's two conference champions face off in a grand final. Its sheer size and the interest it generates have given rise to a very sophisticated economy around it.

Tickets to this mega-event are controlled directly by the NFL, which allocates them to sponsors, players and a few fortunate season-ticket holders. Therefore, for the average person, the only way to get tickets is to buy them on the secondary market from resellers (brokers).

From an economic standpoint, tickets are defined as a perishable good. Once the game begins, they are nothing more than a paper (or plastic) souvenir to remember the day. For this reason, the price maintained a defined pattern for many years: 14 days before the Super Bowl, when the competing teams become known, prices begin to rise. Fans are willing to pay several times the original value to see their team. However, as the game date approaches, prices fall because the probability of being left with an unused ticket once the opening whistle blows increases.

This pattern was exploited by professional speculators in many editions. They sold the promise of delivering a ticket—even without having it—in exchange for a premium, and bought it at the last minute well below face value, obtaining a “sure” profit. This is equivalent to short selling in financial markets.

In 2015, everything changed. After a poor start, the Seattle Seahawks managed to qualify for Super Bowl XLIX, surprising the reseller market. Two weeks remained before the game and prices began to rise, just as expected. However, strangely, in the final days before the game the value of the tickets, far from falling, kept rising, even exceeding USD 11,000. Many brokers had promised to sell at face value (USD 800). To honor their agreement, the intermediaries had to buy the tickets at 14 times the agreed price.

Thus, the intermediary firms found themselves unable to fulfill their promises, which led to the bankruptcy of several of them and the disappointment of many fans.

Given the perishable nature of the good and the historical price pattern, the tickets not falling at the last minute was a tail risk, a “black swan,” like selling earthquake insurance in an area where it traditionally doesn't shake.

However, the evidence shows us that all markets have their black swans which, although uncommon, do exist. A strategy that bets on this is not risk-free and there is no guarantee it will hold forever.