There’s a welfare impact when movie theaters charge higher prices for popcorn, that much is obvious. The intuitive guess would be that the movie theater benefits and customers lose out; consumer surplus goes down, producer surplus goes up. The slightly more nuanced take is that consumers are also better off, because if the theater couldn’t charge a price above marginal cost, then they wouldn’t be able to cover their fixed costs and therefore wouldn’t sell popcorn at all. But say that the price is already high enough that fixed costs are covered so that the movie theater would be willing to supply popcorn. Surely, any price increase above that must benefit only the producers at the expense of consumers, right?

It turns out that even at the margin, and even given that price is already high enough to cover costs, higher popcorn prices may make consumers overall better off. How can this be? This paper explains that total consumer welfare can go up when producers use “metered” price discrimination. This is where consumers are charged more for “aftermarket goods” (the popcorn) and charged less for the primary good (the movie ticket). This type of pricing scheme can benefit both producers and consumers; the theater can charge a lower ticket price, which means that some consumers who would have been priced out of seeing the movie instead choose to attend the movie at the lower price. The paper provides evidence that this type of price discrimination is in fact occurring.

So the next time you’re barely willing to pay the ticket price to see a movie, thank the customers grumbling about their $10 buckets of popcorn.

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