Why do movie theaters charge 4 dollars for a soda which I can purchase at McDonald\u2019s or a gas station for about 99 cents? That movie theater popcorn and soda prices are so \u201coutrageous\u201d used to really annoy me. Surely there\u2019s an economic reason though that sodas at theaters are priced so much higher than they are at other places. When one purchases a ticket and enters the theater, movie theater rules prevent them from bringing in food and drink purchased from other locations. Essentially this restriction allows the theater a 2 hour monopoly on the supply of drink and snack items. For soda purchasers, instead of facing a supply curve where a large number of sellers such as convenience stores and fast food chains are selling, they\u2019re facing a monopolistic supply curve with one supplier. Equilibrium prices are higher than they otherwise would be because of this. Of course, movie theaters wouldn\u2019t charge these high prices for soda if patrons weren\u2019t purchasing 4 dollar drinks. Who in their right mind is willing to pay $4 for a soda? Apparently a lot of people. I\u2019ll admit that usually I\u2019ll purchase at least a soda if not both a soda and popcorn when I watch a movie. This says something about the price elasticity of demand for sodas for movie goers. Elasticity must be lower in the movie theater environment that it is outside. Maybe because movies and sodas are complimentary, patrons have higher incentive to consume them together. It seems like this would lower elasticity and help explain why movie theaters sell 4 dollar sodas and why movie goers are actually willing to pay those prices.<\/p>\n","protected":false},"excerpt":{"rendered":"
Why do movie theaters charge 4 dollars for a soda which I can purchase at McDonald\u2019s or a gas station for about 99 cents? That movie theater popcorn and soda prices are so \u201coutrageous\u201d used to really annoy me. Surely … Continue reading