Why Does Popcorn Cost More at the Movies?

It is an age old question, and one that has sparked many tempers; just why is it that cinemas charge so much for popcorn (and other various other treats)? Naturally, the answer is going to be a touch economical, but it is still fascinating.

New research from Stanford and the University of California, Santa Cruz, suggests that the reason it is so expensive also benefits the customer; in the long run.

Apparently there is another age old question, but this time in economics; is it better to charge money for the primary product, or a secondary product. In our case, the question is thus; is it better to charge more for the movie ticket, or for the accessories?

Looking at detailed revenue data for a chain of movie theaters in Spain, Wesley Hartmann, associate professor of marketing at the Graduate School of Business, and Ricard Gil, assistant professor in economics at University of California, Santa Cruz, proved that pricing concessions on the high side in relation to admission tickets makes sense.

And according to the report, the fact that you are charging more for the accessories helps out the movie going public. Because you are putting the premium on the “frills”, you are thus allowing those who are a little tighter on their money to still go and see a movie. Whereas, if you reverse it, the cinema could very well lose out altogether, because those who are trying to save their pennies might just view the cinematic experience as too expensive.

This is backed up by the fact that though cinemas have to pay a share of the revenue with movie distributors, all the money they make from the concessions go straight in to their own pockets.

The study compared concession purchases in weeks with low and high attendance. The sale of drinks and food turned out to be proportionally higher during low attendance periods, suggesting the presence of “die-hard” moviegoers. These film buffs are willing to see any kind of film, good or bad, and thus willing to pay the price for popcorn as well.

"The logic is that if they’re willing to pay, say, $10 for a bad movie, they would be willing to pay even more for a good movie," said Hartmann. "This is underscored by the fact that they do pay more, even for a bad movie, as is seen in their concession buying. So for the times they’re in the theater seeing good or popular movies, they’re actually getting more quality than they would have needed to show up. That means that, essentially, you could have charged them a higher price for the ticket."

"The argument that pricing secondary goods higher than primary goods can benefit consumers has been circulating for decades, but until now, no one has looked at hard data to see whether it’s true or not," says Hartmann.

Posted by Josh Hill.

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http://www.physorg.com/news122917253.html