Categories:
Microeconomics
Hypothesis: movie theaters often turn a blind eye to those who enter the theater with their own candy and are sometimes inconsistent in their enforcement of rules against theater-hopping. This is a way to price discriminate given that the marginal cost of adding another person to a half-empty theater is basically zero.
Am I missing anything? Is there a literature on this I need to see?
Note: inspired by a discussion in my online MBA class.
READER COMMENTS
Pseu
Nov 12 2014 at 12:23pm
I would expect principal-agent issues would be way larger than any intentional price-discrimination effect. The employee who would enforce these rules has very little to gain in exchange for the hassle of hassling folks about this.
Paavo Ojala
Nov 12 2014 at 2:00pm
More probably blind eye turning is not a policy approved by theater owners, but something that workers just do because they feel uncomfortable enforcing such rules. They’d rather pretend not to notice than act the part of the movie theater nazi.
MikeP
Nov 12 2014 at 2:29pm
I think owners as well as workers are more accepting than Paavo Ojala does. This is primarily not ticking off a small subset of customers who actually do bring you money by acting like a jerk.
I fully expect that if you showed up at the door with a big bucket of popcorn you made at home, you would be asked to leave it behind. But a box of candy in your pocket or sneaking into another theater is fine as long as it’s not at all obvious or a model for others to follow.
On the price discrimination side, notice that movie tickets are generally sold at cost: the only money made in the theater is at the concession stand. If the theater lets someone see a second movie while only eating what food he can hide, he will probably get hungry at some time and be willing to buy the expensive popcorn, hot dog, or soda.
Granite26
Nov 12 2014 at 2:46pm
IMHO, people who bring candy are extremely unlikely to buy candy if told they can’t bring their’s in, both for traditional price discrimination reasons and general human stubbornness.
The real cost would be if everyone started doing it. For many attendees, however, movie consumption is a status good. For the rest, intermittent enforcement should serve as a good restriction.
Besides, aren’t all movie goers teeny-boppers? No one has ever accused them of being high on the foresight.
Paul Geddes
Nov 12 2014 at 2:52pm
See Chapter 16 of Steven Landsburg’s great Armchair Economist
http://www.amazon.ca/The-Armchair-Economist-Economics-Everyday/dp/1451651732
Daublin
Nov 12 2014 at 6:48pm
MikeP’s explanation seems best. The problem with the principle-agent explanation is that you’d expect the theater owners to constantly come down on the attendents, if that were the problem. As far as I know that is not the case.
More plausible is that the owners want to make a nice space to watch a movie in. Rules nazis make it unpleasant for everyone.
Aside from that, there is soft enforcement anyway. You look idiotic when you sneak in with a shirt full of candy, and everyone who sees it knows you are cheating the theater. You’d only do it if the money was really a problem for you, which gets back to the price discrimination explanation.
Warren Meyer writes about this sort of thing from time to time. For example:
http://www.coyoteblog.com/coyote_blog/2014/10/this-is-why-running-a-service-business-is-hard.html
Jack pq
Nov 12 2014 at 7:52pm
Richard McKenzie used this idea as a title for his book, Why is popcorn at the movies so expensive? Basically, yes price discrimination. His book is about much more. Applied microeconomics. He shows that almost everything in micro is explained by price discrimination.
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