Empirical Analysis of Metering Price Discrimination: Evidence from Concession Sales at Movie Theaters
Prices for goods such as blades for razors, ink for printers, and concessions at movies are often set well above cost. Theory has shown that this could yield a profitable price discrimination strategy often termed “metering.” The idea is that a customer's intensity of demand for aftermarket goods (e.g., the concessions) provides a meter of how much the customer is willing to pay for the primary good (e.g., admission). If this correlation in tastes for the two goods is positive, a high price on the aftermarket good allows firms to extract a greater total price (admissions plus concessions) from higher-type customers. This paper develops a simple aggregate model of discrete-continuous demand to motivate how this correlation can be tested using simple regression techniques and readily available firm data. Model simulations illustrate that the regressions can be used to predict whether aftermarket prices should be above, below, or equal to their marginal cost. We then apply the approach to box office and concession data from a chain of Spanish theaters and find that high-priced concessions do extract more surplus from customers with a greater willingness to pay for the admission ticket.
Volume (Year): 28 (2009)
Issue (Month): 6 (11-12)
|Contact details of provider:|| Postal: 7240 Parkway Drive, Suite 300, Hanover, MD 21076 USA|
Web page: http://www.informs.org/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Brian McManus, 2007. "Nonlinear pricing in an oligopoly market: the case of specialty coffee," RAND Journal of Economics, RAND Corporation, vol. 38(2), pages 512-532, 06.
- Meghan R. Busse & Marc Rysman, 2001.
"Competition and Price Discrimination in Yellow Pages Advertising,"
Yale School of Management Working Papers
ysm207, Yale School of Management.
- 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.
- Jehoshua Eliashberg & Anita Elberse & Mark A.A.M. Leenders, 2006. "The Motion Picture Industry: Critical Issues in Practice, Current Research, and New Research Directions," Marketing Science, INFORMS, vol. 25(6), pages 638-661, 11-12.
- Ron Borzekowski & Raphael Thomadsen & Charles Taragin, 2009.
"Competition and price discrimination in the market for mailing lists,"
Quantitative Marketing and Economics (QME),
Springer, vol. 7(2), pages 147-179, June.
- 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.).
- Sanjeev Swami & Jehoshua Eliashberg & Charles B. Weinberg, 1999. "SilverScreener: A Modeling Approach to Movie Screens Management," Marketing Science, INFORMS, vol. 18(3), pages 352-372.
- 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.
- Ronald L. Goettler & Phillip Leslie, 2005. "Cofinancing to Manage Risk in the Motion Picture Industry," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 14(2), pages 231-261, 06.
- Mortimer, Julie Holland, 2007.
"Price Discrimination, Copyright Law, and Technological Innovation: Evidence From The Introduction of DVDs,"
3425914, Harvard University Department of Economics.
- 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.
- Ricard Gil & Wesley Hartmann, 2007. "The Role and Determinants of Concession Sales in Movie Theaters: Evidence from the Spanish Exhibition Industry," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 30(4), pages 325-347, June.
- Andrew Ainslie & Xavier Drèze & Fred Zufryden, 2005. "Modeling Movie Life Cycles and Market Share," Marketing Science, INFORMS, vol. 24(3), pages 508-517, November.
- 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.
- 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.
- Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-890, July.
- Stephen C. Littlechild, 1975. "Two-Park Tariffs and Consumption Externalities," Bell Journal of Economics, The RAND Corporation, vol. 6(2), pages 661-670, Autumn.
- Schmalensee, Richard., 1980.
"Monopolistic two-part pricing arrangements,"
1105-80., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- repec:rje:randje:v:37:y:2006:i:4:p:964-982 is not listed on IDEAS
- Shepard, Andrea, 1991. "Price Discrimination and Retail Configuration," Journal of Political Economy, University of Chicago Press, vol. 99(1), pages 30-53, February.
- Liran Einav, 2007. "Seasonality in the U.S. motion picture industry," RAND Journal of Economics, RAND Corporation, vol. 38(1), pages 127-145, 03.
- Phillip Leslie, 2004. "Price Discrimination in Broadway Theater," RAND Journal of Economics, The RAND Corporation, vol. 35(3), pages 520-541, Autumn.
- Peter Davis, 2006. "Spatial competition in retail markets: movie theaters," RAND Journal of Economics, RAND Corporation, vol. 37(4), pages 964-982, December.
- Cohen, Andrew, 2008. "Package size and price discrimination in the paper towel market," International Journal of Industrial Organization, Elsevier, vol. 26(2), pages 502-516, March.
- Walter Y. Oi, 1971. "A Disneyland Dilemma: Two-Part Tariffs for a Mickey Mouse Monopoly," The Quarterly Journal of Economics, Oxford University Press, vol. 85(1), pages 77-96.
- Glenn Ellison, 2005. "A Model of Add-On Pricing," The Quarterly Journal of Economics, Oxford University Press, vol. 120(2), pages 585-637.
- Julie Holland Mortimer, 2007. "Price Discrimination, Copyright Law, and Technological Innovation: Evidence from the Introduction of DVDs," The Quarterly Journal of Economics, Oxford University Press, vol. 122(3), pages 1307-1350.
- 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.
- Peltzman, Sam, 2005. "Aaron Director's Influence on Antitrust Policy," Journal of Law and Economics, University of Chicago Press, vol. 48(2), pages 313-330, October.
When requesting a correction, please mention this item's handle: RePEc:inm:ormksc:v:28:y:2009:i:6:p:1046-1062. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mirko Janc)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.