Peak Load Pricing at the Movies
By Bryan Caplan
Whenever I’m stuck in a line, I grumble about the need for peak load pricing. Raise the price during popular times, cut the price during off-times, and watch the world’s blood pressure fall.
At the same time, however, I understand why businesses are reluctant to adopt peak load pricing – most of their customers aren’t economists, and non-economists feel that peak load pricing is “unfair.” The customer is always right, even when he’s not.
What I can’t figure out, however, is why some businesses have peak load pricing, but don’t get the peaks right. Movie theaters are the clearest example. Yes, they’ve got expensive evening shows and cheap matinees, and the crowds are bigger in the evenings. So far, so good.
However, as a constant movie-goer, it’s obvious to me that weekend matinees are a lot more crowded than weekday evenings. If you want to stick with two simple prices, it seems more sensible to have peak pricing all day on Friday, Saturday, and Sunday, and discount pricing all day on Monday through Thursday. The only drawback is that this might shift weekend matinee viewers to weekend evening shows, so perhaps theaters really need three prices – weekend evening, weekend matinee, and weekday.
In the spirit of Ayres and Nalebuff, I’m asking “Why not?” You tell me.