Should you pay more to see a blockbuster film during the Christmas holidays when movie going peaks? Less for an obscure foreign film? More on Saturday and at 7 pm? Less on Tuesday and 11 am?
The issue is variable pricing. In this paper, several researchers suggest that “one price fits all” no longer makes sense for movie tickets. Their ideas are discussed here in an Atlantic article with several fascinating graphs about our movie going habits.
Our bottom line: Now that we have the technological capability to variably price, should we?
The Economic Lesson
Variable or dynamic pricing is all about price elasticity of demand. If price changes a lot and the quantity we buy remains almost the same, as with medication, then our demand is inelastic. By contrast, if price swings have a big impact on buying, then our response is elastic.
With movie tickets, certain consumers have an elastic response to lower prices; when price descends they see many more films. Meanwhile, others whose demand is inelastic respond minimally to price changes. Awareness of price elasticity of demand could generate more revenue for movie theaters and savings for consumers.
An Economic Question: Depending on the movie, the time, the day and the season, how would higher and lower prices affect people with elastic demand? Inelastic demand?