Question

It is common for movie theaters to charge lower admissions for children than for adults, but the theaters do not charge children and adults different prices for popcorn and soft drinks. Explain why theaters do not discriminate in popcorn and soft drinks.

Answer 1

The idea is to admit as many children as possible as compared to adults and so the entry charge for children is lower as compared to adults. The more the children come in to the theaters the greater will be the demand for soft drinks and popcorn and so the revenue of the theaters will increase. Children will tend to consume more of such foods and so the idea would be to encourage their entry and so increase the overall revenue. This is an example of block pricing as different consumers are being charged different prices so as to take over as much of their consumer surplus as possible. So a lower admission is charged to children to encourage their entry and increase the revenue through soda and popcorn.