The high prices of food products at multiplexes have caused quite a stir in India. Multiplexes have also been the subject of several public interest lawsuits. But yes, this is a fact very commonly observed by all of us that inside a movie a soft drink brand that costs ₹30-35 outside is offered for ₹100 and more. The cost of a tub of popcorn is more than ₹150.
We all have experienced this wide disparity in the prices and wondered what could be the possible reason behind it. Let us attempt to comprehend the underlying theory.
A comparison of popcorn costs in various bucket sizes at a general market and at a PVR is shown below.
When a customer walks into a movie theatre, they are entering a monopolistic market. There is no rivalry, and the crowd is completely oblivious to what is going on. Prices will, of course, be higher than for similar items in a competitive market. Hence, if he wishes to enjoy refreshments, he is essentially enslaved and has no choice but to pay the fee requested.
If the "customer is captive" theory is valid, you might wonder why there are no paid restrooms inside a multiplex? If a multiplex manager is seeking to make profit through one channel, why isn't he trying to make money through another, given that a customer is enslaved?
The explanation is that popcorn and other food items are considered secondary products in a movie theatre. This can be concluded from the chart below as only 27 percent of customers at a movie theatre buy refreshments.
Increasing the pricing of the secondary product would irritate customers less than increasing the prices of the principal product, such as movie tickets. If a multiplex begins to charge for restroom use, many individuals will seek out other multiplexes. As a result, what multiplexes will receive from increasing toilet charges, they might forgo at the ticket counter as a result of lower customer traffic.
As a result, movie theatre owners attempt to profit by creating a monopoly on secondary items. Some experts claim that this is a legitimate approach to generate money because individuals who do not want to spend more money may just opt not to buy the refreshments.