A NOTE ON UNIFORM PRICING IN THE MOTION-PICTURE INDUSTRY

Abstract

Uniform pricing in the motion-picture industry is puzzling in light of the potential profitability of prices that vary with demand characteristics. Considering a model a la Hotelling in which moviegoers form their beliefs about movie quality through pricing schemes to which an exhibitor commits, we characterize the conditions under which committing to uniform pricing is more profitable than committing to variable pricing. Some extensions of the model are discussed as well.