So how come we’re still stuck with $12 tickets for both blockbusters and indie flicks? A few theories:
1) Theaters do price discriminate already, kind of, but they do it with space. At the multiplex, not all theaters are alike. Bigger movies get more theaters with better technology. Smaller movies get older theaters with smaller screens.
2) You can’t consistently cut prices after a successful opening weekend. If people knew that ticket prices would fall after a big opening, many more would wait until the second or third weekend to see it, which would, ironically, destroy the meaning of opening weekends.
3) Price can repel as easily as it attracts, because it’s a signal of quality. If your a theater showing one movie for $6, one movie for $10, and another for $12, perhaps fewer people will see the $6 movie because they assume it’s garbage.
4) Cheaper tickets lead to higher policing costs. I’m a cheapskate, so I might buy a ticket to see cheap, cheap Iron Lady and sneak into Sherlock Holmes. This would create a fascinating incentive for art-house studios to release smaller, cheaper films the same weekend as blockbusters, knowing that thousands of canny consumers might buy fake tickets to their show to sneak into the more expensive blockbuster.
5) Price discrimination offers more opportunities for other movie theaters to steal each others’ audience. Once again, I’m very cheap, so I don’t mind taking the metro way across town to see Sherlock Holmes for significantly less money if one multiplex starts to mark up its blockbusters.
That is from Derek Thompson. A related research paper is here (pdf). I would rephrase the question to be a little more specific. Especially in the days of robust DVD sales, why did they not offer first weekend modest coupon bonuses — as distinct from price discounts — for the most popular movies? That would drive up attendance, without damaging the gross (as a lower p would), and boost “advertising” for the DVD and the subsequent foreign openings. Movie markets have changed a bit since then, but that to me is the biggest puzzle. I would expect some unpopular but cultish movies to have higher prices, not lower prices, much like Edward Elgar books.