An Empirical Study of Uniform and Differential Pricing in the Movie Theatrical Market

Movies vary widely in appeal, star power, cost, and other elements, and therefore, each might be expected to charge a different price. Multiplexes, however, typically charge the same price for all movies, except for such premium formats as 3D, a choice that has puzzled managers and researchers. Because of data limitations, minimal empirical work has directly addressed this issue. In Hong Kong, however, prices vary both within and across multiplexes. Using daily ticket prices and attendance by theater and movie, the authors empirically examine the potential gains from differentiated movie-specific pricing as well as the increasingly common two-tier (2D/3D) uniform pricing, as compared with a full uniform pricing strategy in which a theater charges the same price for all its movies. Their results show that differential pricing leads to higher profits than the two-tier uniform pricing practice, but that the improvement is limited. In contrast, the gains are substantial when compared with the full uniform pricing strategy, suggesting that only minimal differentiation (2D/3D) may obtain most of the gains available from fully differentiated prices.