At 12:54 PM -0500 11/24/00, [EMAIL PROTECTED] wrote:
I have been using the book The Armchair Economist for a few years in my
classes.
A student who worked in a movie theater suggested that popcorn(and candy,
drinks, etc.) cost more at the movies because the theater has to have many
workers around to handle the rush right before a movie starts. Then those
workers have nothing to do for a couple of hours but they need to be paid for
the entire time they are there. It would be too costly for them to go home
and come back every two hours. So when you buy food there, the extra cost is
for the time workers are getting paid and not doing anything.
I believe Steve got his stuff on popcorn from
me, although I don't have his book ready to hand to check. You will
find the following passage in my _Hidden Order_.
---
In the discussion of popcorn at the end of
Chapter 4, I showed that if customers are identical, theaters should
sell popcorn at cost. One explanation of what we observe is that they
do-that the high price of popcorn (and candy and soda) reflects
high costs. Since the theater is selling food for only 20 minutes or
so every two hours, perhaps its operating costs are much higher than
those of other sellers.
In this chapter I suggested an alternative
explanation. If popcorn is expensive, the poor student who is just
barely willing to pay $5 to see the movie will either do without or
smuggle in his own, while the affluent student (or the one trying to
impress a new date) will still come, despite the cost of lots of
expensive popcorn. The combination of cheap tickets and expensive
popcorn is a way of keeping the business of the poor student while
making as much as possible out of the rich one.
How could one find out which
explanation is right? Discriminatory pricing is only possible if the
seller has a considerable degree of monopoly; in a competitive
industry, if you charge richer customers a higher price, some other
firm will undercut you. In a small town, only one movie theater is
showing a particular movie at a particular time. In a large
city, customers can choose among many theaters showing the same film.
If the discriminatory pricing explanation is correct, we would expect
the difference between the price of popcorn or candy in a movie
theater and its price elsewhere to be larger in small towns than in
big cities. If, on the other hand, the difference reflects a
difference in cost, we would expect the opposite result, since both
labor and real estate-the two things that contribute to the high
cost of a food concession in a theater that can only sell ten percent
of the time-are usually more expensive in cities.
--
--
I believe John Lott, as a graduate student, did
some empirical research on this question in the area near UCLA, but I
no longer remember his conclusions.
--
David Friedman
Professor of Law
Santa Clara University
[EMAIL PROTECTED]
http://www.daviddfriedman.com/
David Friedman
Professor of Law
Santa Clara University
[EMAIL PROTECTED]
http://www.daviddfriedman.com/
