Bryan Caplan  

Solve Tyler's Puzzle

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Tyler Cowen has a number of hypotheses about why all movies cost the same price. As a frequent movie-goer, I'd like to know, but I don't find any of his answers too convincing. A lot of the problem gets solved today by matching up popular movies with theaters with bigger seating capacity, but I'm still puzzled.


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The author at aWpTiMuS.com in a related article titled Why The Same Price writes:
    Bryan Caplan has a question about movie prices, and I may have something to offer to un-puzzle him. He says: Tyler Cowen has a number of hypotheses about why all movies cost the same price. As a frequent movie-goer, I'd like to know, but I don't find... [Tracked on March 8, 2005 10:49 PM]
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Lawrance George Lux writes:

Simple--Distribution Contracts. Studios will not allow Theaters, or Theater goers, to establish Product quality standards. lgl

Andrew Colins writes:

Just some random thoughts on the subject:

-Movies are not perfectly exhaustable. That is your enjoyment of a movie will not completely prevent someone elses enjoyment of the movie especially when the temporal factor is taken into acount. So why try to introduce pricing that tries to efficiently allocate a scarce exhaustable resource.

-Imperfect information. If prices to movies were determined by market forces consumers would need to keep a track of the market to make a decision. The chances of this happening in an efficient way are zero to nil.

-Low absolute cost. Even if a movie were priced by a market the cost of attending a screening would generally be relatively low except for premiers and special screenings. It's simply a small consumer expenditure that you will forget the cost of once you have left the movie.

-Monopolistic competition. Rather than compete on price the movie studios literally try to compete through differentiation.

-This raises the question of who can be bothered? Realistically you just want to see a movie, not at least cost, not to maximise your utility. So for the sake of simplicity the supplier and consumer have historically settled on an agreed price and the decision becomes a yes/no decision for the consumer.

Fred writes:

We do have variable pricing and have for years - the matinee. As for why we don't have variable pricing between movies shown at the same time, I suspect the answer is that distributors don't want to imply that some movies are more worthy than others. Keep in mind that under the distribution contracts, virtually all revenue from ticket sales goes back to the distributor/studio. Theatres keep almost nothing (when I worked my way through college as a theatre manager in the late 80s, it was 90-95% to the distributor). That also, BTW, explains why concession prices are so high. Have to pay for the overhead somehow. The distribution contracts could be structured to allow for variable pricing, but other than the matinee/evening model, I doubt you'll see much of it.

Ross Huebner writes:

Because the price of the movie doesn't matter. All of the profit that the theater makes is from the concession stand. The theater doesn't have to share it's profits there, like it does with the movie. If you'd have been to a movie lately and bought food and refreshments you know all of this. Duh?

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