A Pay-What-You-Want Experiment for the Freakonomics Movie

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The producers and distributors of the Freakonomics film have set up a nice little experiment: a one-night sneak-preview screening (tonight) in several U.S. cities with a pay-what-you-want pricing scheme.

We have written about pay-what-you-want pricing on this blog many times. Many people connect it to the “Bagel Man” story we told in Freakonomics, but that was different: Paul Feldman had set prices but no cashier, so that was an honor-system payment scheme rather than pay-what-you want.

The movie experiment is truly pay-what-you-want, with a minimum of 1 cent (finally, something to do with those pennies!) and a maximum of $100. There was no choice for zero, nor an option for giving some of the money to charity. The choices were:

  • From $.01 to $5.00 at $.50 intervals
  • From $5.00 to $20.00 at $1.00 intervals
  • From $20.00 to $80.00 at $5.00 intervals
  • $90.00 and $100.00

To get tickets, people had to fill in a survey with nine questions, asking about age, gender, income, employment and the like. When the experiment is done, the producers will give us the data, and we’ll write up a summary. Let me prime the pump by asking you a few questions:

  1. Which amount do you think will be the most popular?
  2. Of the cities involved (Boston; Cambridge, Mass.; Chicago; Dallas; Denver; Los Angeles; New York; Philadelphia; San Francisco; and Washington, D.C.) which do you think will pay the most? The least?
  3. Which income bracket do you think will pay the most, and the least? (The choices were: less than $25k; $25k-$50k; $50k-$75k; $75k-$100k; and more than $100k.)
  4. The survey also asks people if they’ve read Freakonomics; will payment be higher among those for whom the answer is yes or no?

I’ve seen a bit of the early data and I’ll share one fact with you: out of nearly 5,000 people who “bought” tickets, guess how many paid $100, the top price?

The answer:

Eighteen.

My question: Why?!!

I am guessing most of the $100 payees thought they would be the only person to do so, and would therefore show up in the data set as the sole high-roller. Sorry, folks.

It does remind me of something that happened in college. I had a brand-new girlfriend, Sandy, and we were planning to go to the movies one night, along with a friend of hers. Sandy told me that if you showed up at the movie theater in town (this was Boone, N.C., with only one theater) with a $100 bill, they’d let you in free because they never had enough cash on hand to make change.

How could you not be attracted to such a clever girl?

So I went to the bank, drained my account and walked out with a crisp $100 bill. That night at the movie theater, the cashier took my $100 bill without a second glance, gave me three tickets and gave me back the change. Sandy smiled. I did too. She wasn’t clever in exactly the way I thought, but she was clever nonetheless.


ChristianCMS

Setting the price before the movie and the amount the people will pay might reduce how many viewers are willing to pay an Xamount of money. If they charge you after the movie is done, people might decide what price is the movie worth according to your self-interest. If they set the price to low at $0.5 to $5 then viewers might says that the value of the ticket it to cheap so maybe the movie has to be cheap making them believe that the opportunity cost of watching a cheap movie is to high. if the ticket it set at an average all movie price around $10 to $20 then there will be more viewers willing to learn some of economics from the movie rather than watching a fantasy movie at the same price. Finally if they set the price to high around $90 to $100 then there will be no viewers only the real freaks of economics that are seldom.

Micah

One consequence from this system, at least at the showing I went to in D.C.: a bunch of empty seats, even though it sold out. I'd say at most the theater was 70% full.

I do have one question for the distributers/producers: were theaters compensated in a standard way? Were their proceeds affected by this experiment?

Entertaining film, by the way!

Kyu

I considered going to this in LA, but decided against it because I can't afford it right now. Sure, I could have gone and paid a penny, or even five bucks, and been fine; but I know from past experience that not only am I likely to give money to people I like and respect for a product which I'm sure is good (like this movie), but I also tend to give more than I otherwise would to pay-what-you-want systems because I wish to support the system itself.

So oddly enough, my desire to see the movie and support the people involved (and the experiment itself) led me to believe I'd spend far too much money, with the result that I stayed home. This is clearly suboptimal--surely there's a point at which I would still be paying some money but not too much, and surely a little support is better than none... but I recognize my own irrationality and decided to remove the possibility of temptation.

Ben

I tried to sign up for this, and then after filling out the survey, was told that none of the showtimes were available for online ordering. Bummer.

James

The theatre was half empty in Philadelphia. I wonder if some people bought lots of 1-cent tickets to resell and failed to find buyers.

Kyle

I paid $0.50 each and bought 4 tickets so that I could give 2 away to friends. I got some flak from Facebook friends when I announced my cheapness, but I couldn't feel guilty because I didn't know who would have got the money if I had paid more.

Would it be the theater? Probably not, plus they were already making money because we bought popcorn. Would the money make it to Levitt and Dubner? Probably not. Perhaps the producers of the movie would get slightly richer if I had been less cheap. That's possible, but I'm thinking that more money would more likely go to the marketing company that set everything up. When it came to ripping off a nameless company, I just didn't feel anything but happiness for getting to go to the movie (which was excellent by the way).

One more note: I didn't pick $0.01 tickets for two reasons. One, I was thinking about the wine problem where people go for the second cheapest bottle of wine as I was making my selection. Two, I figured that the credit card would be charging a few bucks to process my purchase, and I didn't want anyone to lose money on selling me tickets.

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Bob

I wish there was a no-survey group as well. I bet the act of being surveyed increases the amount that people pay, because it decreases anonymity (even if it's an anonymous survey).

atlmom

I went to a $1 movie house not so long ago, and my relative brought popcorn for everyone (some kids were there). So I said to her: why don't you buy popcorn? and she said: oh, it's really expensive here.

My response was: well, you know that's how they make their money. If you only buy tickets, but nothing else, and everyone else does that, then the place will close, and there will be no more $1 movie theaters.

She didn't like what I had to say. I many times think about things like that when I find a 'really cheap' deal - especially these days!! Do I want my favorite restaurant to close - I know that if they are giving away very lucrative coupons...well, they're probably not doing so well. How many do I buy...before they aren't doing well enough to stay in business? It *is* a dilemma...

Lily

Why would anyone pay more than a penny? Wether you pay 1 cent or $100, you would enjoy the movie just the same. Also, tickets were purchase online in privacy so there was no social shame in paying less than the norm. I'm not an Economist but it seems that there was no incentive to pay anything but the minimum. :)

DH

When will you publish the results? Which city paid more, etc.?

Dmitry

My guess is $1 was most popular, as people would consider it almost free, easy to dispense and comfortable with paying something. Similar to $1 a song on iTunes initially.

Dirk Poot

I am very curious what the final result was for this evening? I cannot seem to find a follow article with a breakdown of how many people ended up paying and what the turnover for the evening was? Did the survey give a good guestimate? I'd be really interested to learn the results of this experiment.

Tom

Still awaiting the results!
This experiment was written up in "Introduction to Marketing," 12th ed., (McDaniel, Lamb, Hair; South-Western Cengage, 2012), p 751. And yet no results.