Popcorn and price discrimination

Why do movie theatres sell popcorn, coca cola and hot dogs for such high prices?

On the surface it looks like a classic case of the movie theatre being able to capture the consumer surplus of cinema-goers once they have bought their ticket to see a film.

Say for example you might have been willing to pay £8 to see There will be Blood at your local cinema, but that the ticket price is £6. That implies a consumer surplus of £2. The cinema might try to extract that from you by raising the price of your carton of popcorn well above the marginal cost of supply; you feel like you have got a good deal by getting in to see the film for £6 and psychologically you are perhaps more willing to fork out a little extra for your movie fuel. After all, once inside the theatre, you are hardly likely to go through the hassle of exiting back onto the high street to find a cheaper supply of pop corn or drinks?

The profit margins on popcorn are enormous ... but in terms of sales per customer, are cinemas likely to sell more at off-peak rather than peak-times? Tyler Cowen cites research from two economists Hartman and Gil about concession sales for low and high movie attendances which suggests that hard-core movie goes - the people who go to movies to watch unpopular films as well as the blockbusters - are those who consume a lot more popcorn. Casual customers have a lower per capita demand.

I find that a bit hard to swallow. I take my tutorial groups out the cinema pretty regularly .... and it is interesting to observe the behaviour of a group of talented students most of whom are economists. For the first few visits, they are happy just to queue up at the concession stall inside the cinema, pile up the pop corn and cokes before heading into Screen 6. Nowadays, we stop at the local supermarket along the way and fill up with much cheaper food and drink (some of it sneaked into the movie theatre). But that doesn’t extend to the pop corn! No matter what they have bought en route during their stop at the supermarket, their default position is to buy huge tubs of pop corn, almost totally insensitive to the price, at 3pm, 6pm or 9pm.

Maybe it is because they know that their parents will ultimately foot the bill!