Why is Popcorn so Expensive at the Cinema?

 

Why is the price of popcorn at Cinemas so, pricey? Taking rent, wages (the money to make the cashiers smile at you), and the puny cost of corn taken into account, the mark-up price of popcorn sold at cinemas everywhere may very well sum up to a few hundred percent.

What is weird is that although we know about this, there is never a shortage of buyers to force the price down. The common way of viewing this problem is that the cinemas need to make up for the high costs of renting space in the mall. Yet this explanation touches only the surface as it does not address the reason why the mall is able to force the cinema to pay such a high rent.

Drilling down further into the subject reveals that the real cause of the whole scenario is really mankind’s ultimate enemy, namely scarcity. There is never more than one cinema for one mall because the services sold is cinemas have a high diminishing marginal utility (the satisfaction of watching a movie over again is extremely low). Therefore, cinemas in shopping malls are essentially a small monopoly in action (relative of course, to the distance one cinema is from another).

Knowing the whole economic situation cinemas face, the mall has a high bargaining position because it gets to choose which cinema company gets to run the cinema business. Being a monopoly (reinforced by the sign that outside food is not allowed in the cinema), the cinema in turn gains a good bargaining position against consumers like you and me. In other words, there is only one cinema in the entire mall (and maybe the whole district) compared to hundreds and maybe thousands of customer in the area.

Needless to say, the cinema uses this leverage well and overcharge its poor customers (that is you and me) a great sum of money for it’s products and services. The economical decision is to keep some homemade popcorn in your bag and eat it after the show ends. But frankly, where is the fun in that?

*Also note that cinema’s have a high standby cost and face the risk of an external shock (the movies during certain periods may be extremely bad (see: https://jamesesz.wordpress.com/?s=movie) and customer numbers may drop significantly)

 

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  1. […] The Mystery of Expensive Cinema Popcorns March 17, 2009 Posted by jamesesz in Economics, Ideas, Mystery, Philosophy. trackback […]



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