In Case of Rain

(Photo: Media Pete)

In the town where we stay on the New Jersey shore the local movie theater advertises: In case of rain, we will have an extra show at 1PM on weekdays. Pretty clever. If it’s rainy, the demand curve for going to the movies shifts rightward—who wants to go to the beach in the rain. Accordingly, the theater increases the amount of showings supplied to the market. But why don’t they raise the price of tickets on bad-weather days? Presumably because it would create bad will among customers who might feel exploited, but perhaps there are other reasons. (I can’t imagine that it is difficult to alter prices on a daily basis.)

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  1. Jack says:

    I always wondered why they charged the same prices for all movies. All movies are not the same cost or quality or target audience. A small independent film would have a chance to make more money if the prices were lower because the lower price could spark interest. Big blockbusters would make more money if prices were higher.

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  2. Kevin says:

    You don’t say whether this is a “first run” or “second run” type of movie theater, but in either case, the answer probably has something to do with the pricing model of theaters. Theaters basically make no money on the ticket price. First run theaters usually pay obscenely high fractions of the “gate receipts” to the distributor – up to 95%. Incidentally, that’s why refreshments cost so much … a modern movie theater is actually a concession operation that happens to use movie projection as enticement to buy popcorn and soda. Second run theaters usually pay a fixed cost for a given rental period, regardless of ticket sales, unless they sell too many tickets, at which point they pay a high fraction of gate receipts above the trigger level. Neither have ANY incentive to raise prices to generate more revenue … they won’t see any of it anyway.

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    • Steve S. says:

      I feel bad now, because I patronize the concession stand so rarely.

      I wonder how the theater concession industry has coped with the public’s craze with being health conscious? I haven’t noticed much of an adjustment…

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  3. David says:

    No benefit from raising ticket prices. The theater makes its money on concession sales, not admissions.

    Anything that might deter people from choosing a movie as opposed to a different rainy-day activity is a disadvantage.

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  4. Phil says:

    “Regular price, $15. But we offer a $5 discount on sunny days!”

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  5. mhenner says:

    Remembering all of the articles discussing how movie ticket price are a loss leader, so theatre owners can make their profits at the refreshment stands, it may be in their interest not to raise prices, but to encourage bigger attendance.

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  6. Ray says:

    Who says they don’t? If they did, it certainly wouldn’t behoove them to make a big deal about it by putting it on the sign. As for the loss of good will, the extra showing for rainy days is designed to bring in tourists, not locals.

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  7. Steve Nations says:

    I would be upset if the movie theater tried to gouge me on a rainy day. Bad will indeed.

    Also — and I don’t pretend to understand the finances of movie theaters — but I think that most of the ticket price goes to the movie distributer, and the theater makes most of its money on concessions. So they have an incentive to keep the ticket price down so that movie-goers have more money for popcorn and soda.

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    • Ray says:

      In other words, raise the prices on the concessions, not the tickets. As a bonus, this is probably more difficult for the consumer to detect although I still think it doesn’t matter if you are catering to tourists.

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      • Brad G says:

        Ahh, grand memories of my high school days working a $1 admission second-run theatre!

        But the agument for premium prices in bad weather cannot be extended to the concession stand. Whether moviegoers buy tickets on rainy or sunny days doesn’t change their individual price-elastic demand for concessions. If I’m one of 300 persons in the theatre (rainy day) or have the place to myself (sunny), my interest in paying $3 for a small soft drink is the same.

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  8. Rajat says:

    Changing prices is easy. Managing the customer service issues with angry customers is not. It also would not be profitable. For one, getting a reputation for exploiting customers would lose business. Second, ticket sales don’t generate most of the profit; the concession stand does. By having another showtime, they get more people coming in to buy overpriced snacks.

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