Derek Thompson over at The Atlantic has some great answers this basic question: why do movie tickets cost the same, regardless of the budget of the film? After all, shouldn’t supply and demand dictate prices? Why should you pay the same $12 to see a low budget Indie film vs. a Hollywood blockbuster? He offers the following reasons (emphasis mine):
1) Theaters do price discriminate already, kind of, but they do it with space. At the multiplex, not all theaters are alike. Bigger movies get more theaters with better technology. Smaller movies get older theaters with smaller screens.
2) You can’t consistently cut prices after a successful opening weekend. If people knew that ticket prices would fall after a big opening, many more would wait until the second or third weekend to see it, which would, ironically, destroy the meaning of opening weekends.
3) Price can repel as easily as it attracts, because it’s a signal of quality. If your a theater showing one movie for $6, one movie for $10, and another for $12, perhaps fewer people will see the $6 movie because they assume it’s garbage.
4) Cheaper tickets lead to higher policing costs. I’m a cheapskate, so I might buy a ticket to see cheap, cheap Iron Lady and sneak into Sherlock Holmes. This would create a fascinating incentive for art-house studios to release smaller, cheaper films the same weekend as blockbusters, knowing that thousands of canny consumers might buy fake tickets to their show to sneak into the more expensive blockbuster.
5) Price discrimination offers more opportunities for other movie theaters to steal each others’ audience. Once again, I’m very cheap, so I don’t mind taking the metro way across town to see Sherlock Holmes for significantly less money if one multiplex starts to mark up its blockbusters.