Price Discrimination in Movie Tickets

Keywords: price discrimination movie theater, price differences movie tickets

Introduction

As other service sectors, according to the consumers' personal, cinema delimit different movie seat tickets, and demand three different charges for its customers: one for men and women, one for students, and one for seniors. The cinema create different prices for the same movie, its purpose is to go after a maximum earnings. Seniors and students are costed at low prices for their large flexible demand, and the cinema charge men and women by higher ticket prices anticipated to parents' smaller stretchy demand. The monetary principle behind this occurrence is namely the purchase price discrimination, providing same goods or services to customers apply different prices. First of all, this essay will discuss the definition of price discrimination and its own forms. Then, it'll analyze the reasons why a cinema charges three different charges for its customers from the point of view of price discrimination. Finally, it will evaluate the cinema's three different prices insurance plan for customers.

Price discrimination and its forms

Price discrimination is to determine basic needs, detente demand fluctuation and stimulating consumption. The enterprise provides the same kind of products to different customers at different prices, and it matches different requirements of customers. Price discrimination could be subdivided in diplomas depending on market and the power of consumers paying high or low price, namely the ability of elastic needs of consumers (Corsetti & Dedola 2005). Such price discrimination is executed in three certifications. The first level discrimination is the most extreme form of price discrimination. With this form, the seller is not decided to differentiate to different ingestion ability of varied groups. The next level discrimination is rates basic according to consumer purchase amount size. The third level discrimination is the most frequent form of difference costs. According to different demand of the price elasticity, it might identify customers or market. Generally, on big price elasticity market, it is a low price, and then for small price elasticity market, the purchase price just a little higher. Furthermore, the third degree, can also according to the price difference between the various physical position and exterior image of products. Venture in several locations, and products and services coming from different location make the several prices, including the retail business (Catalua 2004). The local prices of drugs will vary by the pharmaceutical companies across Central American countries (Rojas 2009).

Reasons why a movie theater charges three different charges for its customers from the perspective of price discrimination

The theatre service belongs to the third level price discrimination, is according to the differences between their individual characteristics of consumers to set up market segments. Within this form, the seller from each group consumers gain revenue maximization. For the cinema business, the elderly and the students are believed to have increased demand elasticity, fare is low plus they pay less. In the mean time the adult group has a greater capability to pay higher price, and from that the theatre can realize the maximization revenue.

According to the above-mentioned economic theory, there are 5 major known reasons for cinema to carry out three different charges for its customers. (1) The marketplace must be subdivided into individual market segmentations by different consumer requirements. Movies' price also can be confirmed regarding to customers' age and consumption level in every market segments. For the cinema, the use flexible demand of adult group is small and movie fare is higher. But the old and student's flexible demand is big, to be able to catch the attention of this part of the population to go into the cinema, it has to implement price far lower than adult solution fare. (2) Every market must be separated from each one. In the market segmentation with purchase goods at lower prices, the clients could not sold them at high price to others. Adult cannot straight buy the low price movie solution. By implementing different colors and par, increasing management workers for inspection, it can assure subdivision market shared separation self-reliance. (3) If the price discrimination is affordable or not, it may impact a monopolist earns higher revenue and individual consumers gain or lose (Cowan 2007). For the free financial market, the theatre could setup its prices for every movie to some extent. (4) Market segments should make sure that the cost from retaining price discrimination does not exceed its gain. Performing different prices to different sets of people, the income from higher price on adult could make up loss from the old and students at lower price, realizing profitability in general. (5) The differential prices could not cause customer aversion and dissatisfaction, and it must be legal. Adult has higher income, and are enough to pay higher fare relatively. Students and the elderly haven't any income, charging them for good deal could protect the benefit for most people.

Evaluation about the cinema's three different prices coverage for customers

The strategy of price discrimination has evident advantages. It could prompt ingestion demand uniformity, and avoid enterprise sources of idle or seams. And it also boosts the competitiveness of the movie industry and promotes industry development, help companies to increase sales, speed up the administrative centre turnover, realizing income maximization. In order to improve the rationality of determine different prices, it should make surveys of all consumers. To find out the dissimilarities between each group's flexible demands, it will understand the composition of consumer organizations, consumer behavior patterns and consumer psychology (Gourville & Soman 2011).

Conclusion

In bottom line, the movie theater adopts different fares for three teams: students, parents and old people, using the price discrimination strategy to maximize profit aim for. The three different categories of people form the segregated segment market, and the establishment of the 3rd degree discrimination is beneficial to the majority of people. The strategy of price discrimination helps to promote enterprise's development, to understand the revenue maximization. To create reasonable segments' prices, it should to strengthen guidance on each sections of the movie market, make sure people's utilization demand and elastic demand, so the third level price discrimination for the movie theater charges for three different groups at different prices.

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