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Politics : Politics for Pros- moderated
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From: LindyBill5/26/2008 10:38:33 AM
   of 793883
 
The ethanol program is even worse than you think
MARGINAL REVOLUTION
By Tyler Cowen on Film

Thanks to the inflating cost of popcorn, the price of movie tickets is expected to skyrocket by as much as 30% this year, according to Ricard Gil, a University of Santa Cruz economist who studies the business. "You're going to see a one- to two-dollar increase in the price of a movie ticket," he said. "And that's being conservative."

Here is the link. So what model is required for this to be true? If movies and popcorn are complements, you might think that higher popcorn prices would imply lower movie prices, to partially restore the cheapness of the overall bundle. But more realistically, the movie is a loss leader to attract buyers of high-margin popcorn. If popcorn gets priced out of buyers' range, movie prices will rise to make up the difference since cheap tickets no longer bring in so much extra revenue at the concession stand.

Thanks to John de Palma for the pointer. marginalrevolution.com
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