By Arnold Kling
Tyler Cowen posts on one of my favorite topics, movie economics.
a multiplex will charge the same ($9.50 in my case) for the number one movie and for a flop. Nor is the price more expensive for Saturday night, or during the summer when demand is higher. Can any economic model predict these results?
Of his explanations, my money is on this one:
5. Maybe the whole theatrical thing is a shadowplay for popcorn sales and advertising for a subsequent DVD release. The theater owner, on his side, may not care so much about getting the profit-maximizing price right. So he invests in consumer good will by offering a flat price across all films.
My understanding of the way the industry works now is that the studio, not the theater, is entitled to the gross for the first two weeks. And these days, most movies don’t last more than two weeks. So, from the theater’s point of view, it’s all about the popcorn.
I think that the question is whether to be a discount theater–competing on price for all movies–as opposed to trying to charge lower prices for bad movies.
I think that for most people, opportunity cost is as significant as the ticket price when they see a movie. So, getting a $3 discount on a bad movie probably would not cause people to go to that movie.
For Discussion. For what other goods are you surprised to see flat pricing?