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Why Does Popcorn Cost So Much at the Movies? An Empirical Analysis of Metering Price Discrimination

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  • Gil, Ricard

    (U of California, Santa Cruz)

  • Hartmann, Wesley R.

    (Stanford U)

Abstract

Prices for goods such as blades for razors, ink for printers and concessions at movies are often set well above cost. This paper empirically analyzes concession sales data from a chain of Spanish theaters to demonstrate that high prices on concessions reflect a profitable price discrimination strategy often referred to as "metering price discrimination." Concessions are found to be purchased in greater amounts by customers that place greater value on attending the theater. 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.

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Paper provided by Stanford University, Graduate School of Business in its series Research Papers with number 1983.

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Date of creation: Jan 2008
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Handle: RePEc:ecl:stabus:1983

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  1. Julie H. Mortimer, 2008. "Vertical Contracts in the Video Rental Industry -super-1," Review of Economic Studies, Oxford University Press, vol. 75(1), pages 165-199.
  2. Ron Borzekowski & Raphael Thomadsen & Charles Taragin, 2005. "Competition and price discrimination in the market for mailing lists," Finance and Economics Discussion Series 2005-56, Board of Governors of the Federal Reserve System (U.S.).
  3. Glenn Ellison, 2003. "A Model of Add-on Pricing," NBER Working Papers 9721, National Bureau of Economic Research, Inc.
  4. Meghan Busse & Marc Rysman, 2005. "Competition and Price Discrimination in Yellow Pages Advertising," RAND Journal of Economics, The RAND Corporation, vol. 36(2), pages 378-390, Summer.
  5. Julie Holland Mortimer, 2005. "Price Discrimination, Copyright Law, and Technological Innovation: Evidence from the Introduction of DVDs," NBER Working Papers 11676, National Bureau of Economic Research, Inc.
  6. Phillip Leslie, 2004. "Price Discrimination in Broadway Theater," RAND Journal of Economics, The RAND Corporation, vol. 35(3), pages 520-541, Autumn.
  7. Peter Davis, 2006. "Spatial competition in retail markets: movie theaters," RAND Journal of Economics, RAND Corporation, vol. 37(4), pages 964-982, December.
  8. Orbach, Barak Y. & Einav, Liran, 2007. "Uniform prices for differentiated goods: The case of the movie-theater industry," International Review of Law and Economics, Elsevier, vol. 27(2), pages 129-153.
  9. Ronald Goettler & Phillip Leslie, 2003. "Cofinancing to Manage Risk in the Motion Picture Industry," GSIA Working Papers 2003-E34, Carnegie Mellon University, Tepper School of Business.
  10. Rosen, Sherwin & Rosenfield, Andrew M, 1997. "Ticket Pricing," Journal of Law and Economics, University of Chicago Press, vol. 40(2), pages 351-76, October.
  11. Peltzman, Sam, 2005. "Aaron Director's Influence on Antitrust Policy," Journal of Law and Economics, University of Chicago Press, vol. 48(2), pages 313-30, October.
  12. Shepard, Andrea, 1991. "Price Discrimination and Retail Configuration," Journal of Political Economy, University of Chicago Press, vol. 99(1), pages 30-53, February.
  13. Miravete, Eugenio J & Röller, Lars-Hendrik, 2003. "Competitive Non-Linear Pricing in Duopoly Equilibrium: The Early US Cellular Telephone Industry," CEPR Discussion Papers 4069, C.E.P.R. Discussion Papers.
  14. Anita Elberse & Jehoshua Eliashberg, 2003. "Demand and Supply Dynamics for Sequentially Released Products in International Markets: The Case of Motion Pictures," Marketing Science, INFORMS, vol. 22(3), pages 329-354.
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