Why Popcorn Costs So Much at the Movies: And Other Pricing Puzzles

by Richard B. McKenzie

Why Popcorn Costs So Much at the Movies, And Other Pricing Puzzles unravels the pricing mysteries we encounter every day. Have you ever wondered why all movies, whether blockbusters or duds, have the same ticket prices? Why sometimes there are free lunches? Why so many prices end with "9"? Why ink cartridges can cost as much as printers? Why merchants offer sales, coupons, and rebates? Why long lines are good for shoppers? Why men earn more than women, around the globe – and why they always will? Richard McKenzie goes on to show how the 9/11 terrorists still kill Americans every day, because their attack distorted the perceived risks and relative prices of air vs. automobile travel, and jacked up both security costs and flight delays. Professor McKenzie also explores the unintended consequences of well-meaning efforts to spur the use of environmentally friendly fuels: starvation among millions of people around the world, and the destruction of rainforests in Malaysia and Indonesia. How can these things be? If you think you know the answers, think again. Why Popcorn Costs So Much at the Movies, And Other Pricing Puzzles shows you that the real reasons are sophisticated and surprising – and in Professor McKenzie’s hands, both informative and entertaining. You won’t need a degree in economics to enjoy this fascinating book, just an armchair and an inquiring mind.

Genres: Economics, Nonfiction, Business, Sociology

342 pages, Hardcover

First published January 1, 2008

Reviews

[Santhosh · Rating 3 out of 5]

This is a fairly good piece of work as a consolidated and organized structure of major topics related to pricing: pricing and the law of unintended consequences, asymmetric information, market dynamics, price discrimination, peak-load pricing, decoys, elasticity of demand, seasonals, coupons, zero pricing, buyer entrapment, just-below pricing, behavioral economics, loss aversion, queues, gender pay gap, etc.

Where McKenzie lets us down is, when introducing economics into the picture, his examples are, more often than not, forced hypothetical correlation rather than actual causation. Most of his examples thus look like that oversmart student who answers his exams by repeating the question by changing the active to passive voice. McKenzie's version is something like that. The situation: the seller does this and the buyer takes it. The reasoning: The buyer is apparently ok with what he's getting, and so the buyer does that. There is more than one instance where the book already seems dated because of this, since market changes have already shown up his forced so called pricing strategies (e.g.: movie theaters have already started peak-load pricing, even if supply-side differential pricing is still on the way).

[Jonathan Jasinski · Rating 3 out of 5]

An interesting read overall, although it has its flaws. It feels overly complicated or unclear at times, some of the conclusions are a bit rushed or reductive, and not every specific topic is given due time given its relative interest imo- but whatever, if you have a passing interest in econ give a chapter a try and see if it grabs you. Some of it struck me as "well no crap" and other explanations were far different from what I would think, but over the course of the book there was definitely enough new material to keep me interested. It struck me as somewhere between freakonomics and a college supplemental textbook- it's definitely not light reading, but the concepts come through clearly enough where I felt I gained plenty. Last 4 chapters aren't the best, though- rebates, queues, and the gender pay gap. The rebates are just kinda boring and get two chapters, the queue chapter feels like it throws a lot at the wall and sticks with none of it, and the gender pay gap is such a complicated issue that even the insights offered feel like they don't really support a solid conclusion (something McKenzie says himself about this part, to be fair). So kinda a weak ending, but up through the chapter on prices ending in 9- eh, I found it all pretty interesting. Ps- pg 224/225 had a theory I found interesting, linking past survival instincts/abilities with current capitalism. It's barely touched upon, but the idea is basically that because those that produced quickly and efficiently put themselves in position to produce more (babies amongst other things), and that can be linked to our economic system of choice- I've just never seen the idea put so bluntly, and I also found it interesting McKenzie comes nowhere close to claiming this connection to be accurate- the way it's worded just says "it's no surprise then that we came up with and insisted on capitalism," something to that effect. Just an interesting part for me personally and one worth consideration- is capitalism a natural offshoot of survival instinct, and is it connected more in our minds than in reality? Is it outdated? Etc. I'd contend the connection to evolution makes sense, being able to produce more greater ensures your survival, but that it also might be outdated in today's age. Whatever, just a note for myself there, that part was barely touched upon but was probably the most interesting idea presented imo.

[Chris Aylott · Rating 3 out of 5]

The author is extremely smart, and will not hesitate to tell you so, so please be sure to pay close attention to his golden thoughts, and I think I'm going to gag. But he does have some interesting thoughts on pricing, and how a simple price point usually has a complex set of of needs and circumstances tied up in it. McKenzie digs through a wide variety of discounts, rebates, and pricing schemes, showing how they segment markets and relate to other concepts such as search time and marginal cost.

The main thing I'm taking away from this is that despite appearances, price is almost always mutually agreed upon between buyer and seller. Each side has needs that are being fulfilled, and even "unfair" prices usually present both sides with clear (if subtle) benefits. I'm not as sold on the idea that almost all buyers are rational actors as he is, but he does show how many buyers pursue reasonable buying strategies by being "rationally ignorant."

[Brian · Rating 5 out of 5]

Why Popcorn Costs so Much at the Movies is a romping good time for those interested in pricing theory at a microeconomic level. You definitely have to be an economist to enjoy this one but if you are the wit, humor and various pricing games are a delight and make you think strategically about a number of pricing issues. Covering everything from the books title to why everyone is charged the same at the movies to the effects of sales and rebates on consumer behavior. This book looks at the often law of unintended consequences when something other than the market tries to effect prices and how price discrimination can occur in a variety of ways. The book looks at a variety of pricing models including various conundrums like free or cheap printers and high-priced ink cartridges and the profits of zero pricing (ie free goods). Finally, the book looks at queuing and the effects of waits for things like restaurants or checkout lines at store and delves into the real world strategy of how markets work beyond the theoretical side of the classroom. Overall this was a ton of fun to read and well worth it for those interested in economics or business.

[J. · Rating 2 out of 5]

I made it a little ways into this book, but the bits were fairly boring, didn't seem particularly deep or enlightening, and consistently had the magical thinking that the Invisible Hand of the market can only do good and can never do harm. I was gaining more frustration than enlightenment, so I gave up. I don't think I'm the target audience for this book: I already have experience thinking through these sorts of arguments and I'm much more likely to take a pros-and-cons approach, rather than an all-pros approach.

[Jim Milway · Rating 4 out of 5]

Good refresher on price theory. McKenzie pushes beyond the obvious reasons for pricing anomalies and Develops alternate reasons why -which I think hang together.

An economics text book - but accessible to the non-specialist.

[Ariadna73 · Rating 3 out of 5]

First discovery that leaves my mouth open: how it would cost less (in lives) to overlook a terrorist plot that can become a terrorist attack in an airport because it would save the lives of many freeway users that would fly if the security level is not raised.... atonishing!

Preface : How price matters -- ch. 1. Price and the law of unintended consequences -- Hybridnomics : HOV-lane economics; California style -- Air travel safety for infants and toddlers -- 9/11 terrorists and American deaths since 9/11 -- Water crises in Southern California -- Ethanol subsidies and world hunger -- The California electricity crisis -- Concluding comments -- ch. 2. Pricing lemons; views; and university housing -- The pricing of lemons -- How prices adjust to advantages and disadvantages of property -- Why retirement does not curb the retirees' food consumption -- University mispricing -- Concluding comments -- ch. 3. Why sales -- Price discrimination theory -- A textbook case of textbook price discrimination -- The logic of after-Christmas sales -- Sales and the economics of information -- Concluding comments -- ch. 4. Why popcorn costs so much at the movies -- Differential theater ticket prices -- Uniform popcorn prices -- The high price of theater popcorn -- The misguided entrapment theory of overprices popcorn -- Movie screening contract -- The Supreme Court and the high price of theater popcorn -- The cost of theater popcorn - on the margin! -- Concluding comments --
Contents: ch. 5. Why so many coupons -- Coupon and price discrimination coupons and peak-load pricing -- Evidence on couponing -- Coupon collusion -- The economics of information and coupons -- Concluding comments -- ch. 6. Why some goods are free -- Profits from zero prices -- The nature of products and pricing strategies -- The pricing of experience goods -- The pricing of network goods -- Network effects and the Microsoft antitrust case -- Optimum piracy -- The pricing of addictive goods -- Rational addiction -- Concluding comments -- ch. 7. Free printers and pricey ink cartridges -- Relative production costs and buyer entrapment -- Low- and high-volume printer users -- The relevance of search costs -- Differences in discount rates -- Gaming printer -- Cartridge deals and technical and contract solutions -- The evidence on the relative printers and their ink cartridge -- Concluding comments -- ch. 8. Why movie ticket prices are all the same -- Different price for different folks -- The puzzle of uniform ticket prices at the movies -- Past price variations -- Why uniform ticket prices -- DVD releases -- Concluding comments --
Contents: ch. 9. Why so many prices end with 9 -- Just-below prices as historical artifact -- Just-below pricing and information economics -- Psychological pricing as code -- Concluding comments -- ch. 10. The economics of manufacturers' rebates -- The nature of rebates -- The reasons for rebates -- Rebates and product demand -- Breakage economics -- Concluding comments -- ch. 11. The psychology and evolutionary biology of manufacturers' rebates -- Subjective weighting of costs and benefits -- Endowment effects of purchases with rebates -- Salience and procrastination -- Explanations for peoples' observed decision making -- Concluding comments -- ch. 12. The question of queues -- Queues as pricing puzzle -- The easy solutions for queues -- The economic logic of queues -- Premium tickets -- Contrived shortages and buyer loyalty -- Bandwagon effects and queues -- Single versus multiple queues -- Last-come/first-served; a solution for queue length? -- Concluding comments -- ch. 13. Why men earn more on average than women - and always will -- Conventional explanations for gender-pay differences : a different conceptual framework -- Risky behavior -- The linages between mating and labor markets -- Explaining the narrowing pay gap -- The female male wage gap : hard wired or cultural? -- A summary assessment -- Concluding comments -- Bibliography -- Subject index.

[David · Rating 3 out of 5]

I think it started off good, but quickly devolved into a winded academic paper. However, I did learn from this book and that's a positive. The many discussions of grocery stores, coupons, and manufacture rebates have immediate applications to my day-to-day life and the sense of saving money in an uncertain economy.

Specifically, through reading this book, I learned that coupons are a method of "price discrimination" whereby a manufacturer charges two different prices for two different classes of people. The coupon is for the price sensitive buyers while the "normal" price is for price insensitive buyers. I asked myself "why am I paying more when the manufacturer is putting a lower price out there if I would just go get that pice?" (i.e. start clipping coupons and get in on the lower prices).

It also caused me to rethink my opportunity cost of going to the nearby but more expensive grocery store versus driving a few miles to a cheaper grocery store. In more certain times, I didn't want the hassle as my time seemed more valuable to me. Now I don't mind spending more of my time saving more of my cash.

[Lectus · Rating 2 out of 5]

Am I really dumb or this guy explains things in a very difficult way. For instance, I read the section about the shortage of water in California and, from my understanding, there's no such shortage. They increase the price of water when it doesn't rain too much to create awareness that it isn't raining so they should mind the water. Well, if that really is the explanation, couldn't he just say so without so much blah blah blah?

The explanations must be in the book, I just didn't find them as they were buried under a sea of economic verbose.

A shorter, more concise, in layman's language book would had been better.

I also got the impression the author jumped from one thing to another without finishing his thoughts.

The editor of this book must have a Ph. D. in economics. I'm sure the editor and the author are the only ones who read the whole thing! What the heck, this book must have been written for Republicans! I was looking for something more straight forward and simple for my brain; something more like Freakonomics.

So, why does popcorn cost so much at the movies? I still have no idea.

[Sunil · Rating 2 out of 5]

the ideas and theories are fine, but the author goes way overboard in repeating himself throughout the chapters. as someone whose primary job involves pricing, i can relate to the fundamental ideas he espouses but his explanations and arguments are long-winded and incomplete. if you are not familiar with pricing, however, you'll probably enjoy skimming through this book as it does a decent job of explaining some basic precepts of pricing without getting too technical.

if i was the publisher, i'd put out a version that is a lot shorter, and pick another editor to keep the chapters moving a bit better. i ended up skimming through the last half of the book.

[Matt · Rating 3 out of 5]

Very readable although the format was almost more like a textbook than “popular nonfiction”. Chapters included: Why copupons?, Why does popcorn cost so much at the movies? Why rebates? Why queues? Why the male/female wage gap will always exist, And probably others that I am forgetting right now. I always think it’s nice to know theories which let one understand things which seemed not to make much sense. The short answer to all the questions: opportunity cost. The slightly longer answer: opportunity cost combined with price discrimination through market segmentation for profit maximization.

[Christina · Rating 2 out of 5]

I thought this book would be similar to "Freakonomics", but it's way too heavy on economic theory for me. I skimmed the sections I found interesting on movie prices, popcorn at the movies, coupons and rebates, but I didn't learn anything knew. In fact, I disagreed with most of the author's way out theories (like women get paid less than men because men compete more strongly for higher wages in order to win better mates- huh?). I think sometimes the simplest theory is the correct explanation.

[David Robins · Rating 4 out of 5]

This is a well-written well-sourced book examining a series of economic puzzles and explaining how the obvious, or folk wisdom, answers are usually inaccurate or don't tell the whole story. Covers the topic title, and movie seat pricing (why isn't it variable?), why women are paid less than men on average, price discrimination, coupons and rebates, university housing, "lemon" cars, free goods, prices ending in "9", cheap printers and expensive ink, sales, and queues, with detailed attention to the underlying economics and psychology.

[♥Xeni♥ · Rating 3 out of 5]

As someone who has no background in economics, this book was quite difficult to read. I wanted answers to some or the questions posed by the author. Or, rather, I much more wanted the "explain it like I'm five" version. Only after multiple readings of some chapters could I even begin to explain it to someone else.

This is the sad part of the book. The happy part is that things are explained! In that way it's a really great book in uncovering these odd mysteries.

Also, I never buy movie popcorn.

[Tyler · Rating 4 out of 5]

Very interesting. Even knowing some about economics already, this provided some new information that I hadn't heard. It also challenges, not refutes, many mainstream thoughts like popcorns costs so much because they have a monopoly. It also provides an interesting perspective on the wage gap between men and women which I had never heard before. Overall, a good book for people to read. Even libertarians who think they have heard it all should read this because it provides very different information than what we are used to.

[Bridget Casey · Rating 3 out of 5]

Very interesting collection of microeconomic analyses of a variety of topics (everything from movie ticket prices to the gender pay gap). Other reviewers complain the author is arrogant and his literary style a bit dry, which is true only because the book is a more cerebral work than "Freakonomics". I enjoyed it, even though I did feel it read much like a textbook. Overall it's a tad disjointed and the printer ink chapter was way too long, but I enjoyed the in-depth study that shed new light on misunderstood everyday phenomena, like why popcorn costs so much at the movies.

[Petko Bossakov · Rating 3 out of 5]

This is a nice book for anyone interested in pricing, but its style is a bit unusual. Not quite light enough for popular science, yet not quite dense and structured enough to be a textbook. (Actually, at university we're giving it to students as optional supplementary reading.)

McKenzie may be going a bit too far in his assumption that all buyers act rationally, but it's interesting how pure economical reasoning can give unexpected answers to many pricing puzzles. (Many, but not all; some of the puzzles in the book are ultimately left unsolved.)

[Mark · Rating 2 out of 5]

I did something with this book I almost never do. I stopped actively reading in about the second chapter, and just skimmed the rest. It's good information, but it is presented in such a dry, academic way once you get past the initial interesting examples that it is a tough slog.

Also: Five demerits for calling it "the Noble Prize" twice on one page.

[Vincent · Rating 2 out of 5]

Note to self: Trust the wisdom of the crowd and don't read anything below 3.5 stars.

Hoping to learn more about pricing, but found was neither econ pop lit nor particularly insightful beyond outlining a couple key terms.

[Alicia · Rating 2 out of 5]

This book was incredibly dry. I mean, I LOVE non-fiction, but I was slugging through this one. It just seems like there are so many factors that go into price, how can he say, even as an economist, that his observations are more correct?

[Matt · Rating 4 out of 5]

Somewhat disjointed at time as the author drew from multiple sources for materials. But the underlying concepts are valuable and the related discussion extremely nuanced. I love seeing authors consider multiple hypothesis and all the related logic. Very readable

[Peg]

misti, reading,why popcorn costs so much at the movies

[Emily]

@ neither.
I think economics should definitely be studied by using popcorn and other junk food.

[Hanin · Rating 4 out of 5]

Funny why they don't allow us to bring our self-made popcorn inside...

[Alpha · Rating 3 out of 5]

Kind of interesting, but rather dry. There's some good stuff in the book, but I liked The Undercover Economist better.

[Katherine · Rating 2 out of 5]

Boring!! Ok not boring as much as just way too dense. Or maybe just I've been spoiled by the EZ reading of social/economic books like Freakonomics.

[Eric · Rating 2 out of 5]

Interesting view of prices and economics, but it repeated itself and got a little long.

[Steve · Rating 2 out of 5]

I don't remember them talking about popcorn all that much, but there was a lot of discussion on the pricing of the Toyota Prius across the United States.

[Will · Rating 4 out of 5]

A fascinating look into the layman's side of economics. Similar to freakonomics!

[Kel · Rating 2 out of 5]

Interesting, but still a little unapproachable for someone who's not much interested in economics. The last chapter had a lot of heterosexist gender stuff that left a bad taste in my mouth, too.