Friday, October 09, 2009

The Economics of the Movie Ticket

A couple of days ago, Nicholas Tabarrok noted the strange economics of the film industry at MR. Movie theaters do not charge lower prices for movies that are unpopular. Similarly, highly anticipated movies have the same ticket price as movies that are proven flops. Why is that?

If the movie theater charged different prices for movies, it would need to hire individual ticket takers for multiple theater entrances at the multiplex--one for each theater that's seating at the time (otherwise people would just buy the cheapest ticket). This is a drastic increase in costs both in payment to the employees and to management, who must now organize a complex system of employees.

Instead, the theater simply adjusts how long a movie is being shown. Good movies are shown for a while, bad movies leave the theater quickly (making room for theaters showing the good movie). It's not as direct as individual pricing, but it's much more cost effective.

2 comments:

Jason said...

On the other hand, movies are shown at different times. If I get a $5 ticket and try to sneak into a $10 movie, I could wind up missing half the movie (which makes sense in a way), all without needing additional personnel.

OTOH, there is tradition. I don't think a theater could get away with charging different prices for different movies. We're used to one price regardless of movie length or quality.

That's another thing, some movies are short and some are long but they all cost the same at the box office. I remember seeing the King Kong remake, they gave us an intermission to use the bathroom. That cost the same as a shorter movie.

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