Why do movie theatres sell popcorn for such high prices?
Cinemas aim to gain all the consumer surplus of cinema customers once they have bought their ticket to see a film. For example you might have been willing to pay £8 to see Saw VI at your local cinema, but that ticket price is £6. Consumer Surplus = £2. The cinema may then raise prices of popcorn in order to gain this £2 consumer surplus. However the consumer may feel they have got a good deal where in actual fact they have incurred a loss.
Cinemas also price discriminate through peak and off-peak pricing. They separate markets by time: daytime rate and evening rate. For example an adult would pay £6 to watch a film before 5pm after which prices are charged at £9.
In the popcorn case customers may feel they have got a good deal where in actual fact they are incurring a loss in consumer surplus. The cinema goers aren’t actually getting as good a deal as they believe.
Concerning the peak and off peak pricing, spare capacity at off-peak times allows the cinema to charge lower prices, however where demand is high at peak times, supply becomes inelastic. This combination causes a rise in the profit maximising price.
Your Welcome VC 1 !
Cinemas aim to gain all the consumer surplus of cinema customers once they have bought their ticket to see a film. For example you might have been willing to pay £8 to see Saw VI at your local cinema, but that ticket price is £6. Consumer Surplus = £2. The cinema may then raise prices of popcorn in order to gain this £2 consumer surplus. However the consumer may feel they have got a good deal where in actual fact they have incurred a loss.
Cinemas also price discriminate through peak and off-peak pricing. They separate markets by time: daytime rate and evening rate. For example an adult would pay £6 to watch a film before 5pm after which prices are charged at £9.
In the popcorn case customers may feel they have got a good deal where in actual fact they are incurring a loss in consumer surplus. The cinema goers aren’t actually getting as good a deal as they believe.
Concerning the peak and off peak pricing, spare capacity at off-peak times allows the cinema to charge lower prices, however where demand is high at peak times, supply becomes inelastic. This combination causes a rise in the profit maximising price.
Your Welcome VC 1 !
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