This blog contains posts and comments written by students in Dr. Tufte's economics classes at Southern Utah University.
3/14/2008
Thank You Die-Hard Moviegoer
There are two types of consumers that frequent the movie theater. The first is the casual moviegoer that sees the great movies we all love and remember. The second is the die-hard moviegoer that finds a terrible reviewed movie to watch late Tuesday night with a five dollar tub of popcorn. Die-hards are consumers that are not price sensitive while casuals will opt for bowling if movie prices increase. The movie theater business has a fairly competitive market, nevertheless competition is decreased when the moviegoer enters the theater. Once a movie theater has the hungry consumer inside the door their ability to increase profit margin on concessions has increased. Increasing profits then becomes a matter of getting more people in the door with a lower ticket price followed by an increase on particularly the sale of popcorn. The lower ticket price that the casual moviegoer enjoys is a result of the die-hard attending many movies and purchasing tons popcorn. Therefore the casual moviegoers should refrain from complaining about the price of popcorn when they hold a seven dollar ticket stub at their next movie.
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3 comments:
In reading the article I found that it was very interesting. I think so many times movie theaters do not understand basic economics. The movie theaters understand that there is a group of people that will pay a high amount to go to the movie, but what they don't understand is that the majority of the people are not willing to pay that amount. Instead what movie theaters should do is raise the price of the concessions. They should raise the concessions to high amounts because once the "die-hard moviegoers” go in, they will pay the costs for the food/beverage.
As noted in the article it plainly said, "If you want to bring more consumers into the market, you need to keep ticket prices lower to attract them." Once you got them in though you've got them trapped to pay the high amounts of money for the concessions.
I agree with William. Every time the ticket price rises, I find myself attending the movies less and less often. If the theaters had any sense, they would take advantage of the inelastic demand of the die-hards through concessions while attracting everyone else through lower ticket prices.
This is actually a big area of research. It isn't just movie theaters, it is concert and sports venues as well.
The problem is why these things are priced as low as they are, when people profess to enjoy them so much.
The argument reported here is a new one, and a pretty good one. But, this sort of research can't be done until someone finds a data set that allows you to test it - that's a big stumbling block in this sort of research.
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