Why are all movies the same price?

Well, not the same price in all cases.  Before 6 p.m. is cheaper, there are numerous dollar theaters, and not all films allow for discount coupons.  Nonetheless a multiplex will charge the same ($9.50 in my case) for the number one movie and for a flop.  Nor is the price more expensive for Saturday night, or during the summer when demand is higher.  Can any economic model predict these results?  Here are a few observations:

1. Theater owners are trying to maximize profit across all screens.  Spillover demand, from people who can’t get in to see their first choice, is a significant source of revenue.  You don’t want markets to clear on a screen-by-screen basis.

2. Low prices encourage queuing, which attracts the young and hardy.  Those same customers are most likely to spread the virtues of movies by word of mouth.  A theater might rather have a young customer than an old customer.

3. Lines for a popular film are one way of generating valuable publicity.

4. A priori, I would have expected the number one movie to sell cheaper, not more expensive.  Moviemakers wish to generate snowball effects for potential hits.  (For purposes of comparison, it reflects commercial prestige to have your books sell for a low rather than high price.)  This also predicts movies will be cheaper in early stages of their run, which does not generally seem to be true.

5. Maybe the whole theatrical thing is a shadowplay for popcorn sales and advertising for a subsequent DVD release.  The theater owner, on his side, may not care so much about getting the profit-maximizing price right.  So he invests in consumer good will by offering a flat price across all films. 

6. The emergence of strict uniform pricing across movies appeared in the early 1970s; it is sometimes suggested that Paramount insisted upon such pricing (illegally) for the release of The Godfather.  (The 1948 Paramount decision limited the involvement of the distributor in pricing decisions, but there is pressure nonetheless.)

7. Variable pricing would divert movie demand to weekdays, which would make it harder for a film to be number one at the box office for its opening weekend.  And since a top  movie will sell out in any case, why bother lowering the price for Saturday night?

8. With differential prices you might buy a ticket for a cheaper movie and walk into the more expensive movie.

You could ask related questions about why restaurants do not tack on a surcharge for Saturday nights, although I find this practice is becoming more common.  As far as the movies go, I will put the most weight on #7.  And I have turned on the comments section…


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