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

Author

Listed:
  • 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.

Suggested Citation

  • Gil, Ricard & Hartmann, Wesley R., 2008. "Why Does Popcorn Cost So Much at the Movies? An Empirical Analysis of Metering Price Discrimination," Research Papers 1983, Stanford University, Graduate School of Business.
  • Handle: RePEc:ecl:stabus:1983
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    File URL: http://gsbapps.stanford.edu/researchpapers/library/RP1983.pdf
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    References listed on IDEAS

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    1. Peter Davis, 2006. "Spatial competition in retail markets: movie theaters," RAND Journal of Economics, RAND Corporation, vol. 37(4), pages 964-982, December.
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    5. 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.
    6. Glenn Ellison, 2005. "A Model of Add-On Pricing," The Quarterly Journal of Economics, Oxford University Press, vol. 120(2), pages 585-637.
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    8. 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.
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    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. Phillip Leslie, 2004. "Price Discrimination in Broadway Theater," RAND Journal of Economics, The RAND Corporation, vol. 35(3), pages 520-541, Autumn.
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    Cited by:

    1. Belleflamme,Paul & Peitz,Martin, 2015. "Industrial Organization," Cambridge Books, Cambridge University Press, number 9781107687899, December.

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