When angry consumers raise an outcry over price gouging, movie-theater popcorn is one of their favorite targets (along with beer at the ballpark and virtually any rise in the price of gasoline.) But two Stanford University professors say that the big vats of buttery kernels are costly for a good reason – and that the high prices may actually benefit the casual moviegoer.
Economist Ricard Gil and marketer Wesley R. Hartmann studied a Spanish cinema chain and found something curious about concession sales: They didn’t fall much in weeks when movie attendance was low. This suggested that avid moviegoers — the folks who come out to see any film, no matter how bad, obscure or unpopular — spend much more on food and drinks than the casual fan who only goes to see a blockbuster.
The movie theaters could charge more for admission to “Iron Man” than for a relative flop like “Bucket List.” But higher prices might limit the blockbuster’s appeal and actually hurt the theater’s revenue. Instead, they hit the hard-core cinephiles with high popcorn prices. In academic terms, this strategy is called “metering price discrimination.” The profs say in their abstract:
In other words, the intensity of demand for admission is “metered” by concession sales. This implies that while some consumers’ surplus may be reduced by the high concession prices, surplus of other consumers on the margin of attending may increase from theaters’ decisions to shift their margins away from movies and toward concessions.
So stop complaining and enjoy the movie. No one forced you to buy that $5 popcorn, did they?