A group academics from Stanford and University of California, Santa Cruz have completed a study on movie theater pricing in Spain which concludes that when primary goods, movie tickets, are priced higher than the secondary goods, popcorn, it can benefit everyone. The less prices sensitive moviegoers spend more money at the concession stand, in effect paying for a “premium” experience. This research is summarized here.
Pricing in this manner is such common practice that I was surprised to learn that it had not been studied quantitatively before:
The argument that pricing secondary goods higher than primary goods can benefit consumers has been circulating for decades, but until now, no one has looked at hard data to see whether it’s true or not.
Freemium pricing, popular with many web start-ups, is the logical extreme of this approach. The primary good, basic access to the site, is free while the secondary goods, premium features, integrations options, administration tools, etc., typically require a subscription fee.
There are more than a few entrepreneurs hoping that web users exhibit similar characteristics to Spanish movie-goers to make this model work profitably.