Customer Reviews

Why Popcorn Costs So Much at the Movies: And Other Pricing Puzzles

5 star:		(11)
4 star:		(3)
3 star:		(2)
2 star:		(5)
1 star:		(2)

 

 

--This book tells us more than we ever wanted to know about prices.

--Indeed, here's probably more about prices than we ever thought there was to know!

If you're a casual reader who's just trying to catch up on what's going on around us, the going could be slow and tedious. However, if you're a university prof, serious economics student, or a marketing or merchandising strategist ready to dive below the surface of pricetag information, you'll probably find this book information-stuffed, no doubt interesting...perhaps fascinating, even fun and easy to read.

"Why Popcorn Costs So Much...," valuable as it may be, is just not for a light afternoon's read at the beach. Consider one of McKenzie's opening paragraphs on price adjustment: "One of the unheralded advantages of prices is that through market forces, they capture the advantages and disadvantages of property, in the process giving a market value to the advantages or disadvantages. Prices adjust until buyers are more or less indifferent between properties." [Page 33] --Or an explanation of standard pricing with 9s [as in $4.99]: "From a strictly economic perspective, if there were no cost to buyers considering rightward digits, and there were only gains from allaying the unexpected expense of paying the rightward digits, then there would be no reason for buyers not to consider all digits equally, no matter how high the price. There would be no reason then for the just-below prices...." [Page 183] --Oh, come on, Mr. McKenzie! Isn't there an easier way to say all this!? Re-reading has been SOP for this reader throughout the book.

Occasionally, though, pages do make some sense (topics on coupons, on rebates especially), but this still is not a consumer primer for smart buying. Minor economics tech-talk and cold theory abounds. Never an easy read for the uninitiated, the author seems satisfied explaining things in 40 words when the average consumer-writer might say it in 20. --With one exception: McKenzie (mercifully) includes a section of "Concluding Comments" at the end of each of his 13 chapters, amounting to a nice summary of every chapter's topic. So, here's a hint for the reader: scan or skip over the heart of the chapters and head for the summaries! They're short and understandable. Beyond that, it quickly gets a little more complicated than expected.

--And forget the back cover PR blurb (!) about not needing "a degree in economics to enjoy this fascinating book. Just an armchair and an inquiring mind," it says. True, you won't Need advanced econ to get thru it, but: this surely could be one of the entries on your economics booklist as you trek on toward getting that degree. [Especially if you're registered in Professor McKenzie's class, I suspect.] "Fascinating"? --Overstating it some.

As you "read" this work, note how many times the author refers to "his economics students," and how he's obviously comfortable using lecture-speak in and out of the classroom. He includes a vague chapter on university housing. Too, he offers many references to [presumably university] "textbook pricing." This book is definitely "higher-ed" slanted. Naw...for those not already schooled in some level of economics, it's not an easy/interesting book to get through.

Finally, do ignore McKenzie's current efforts in media interviews to help make this book sound simple, consumer-oriented, reader-friendly. He chuckles his way through some talk-show-host's questions, often providing answers in short quips, quick explanations, and simple clarifications... not even close to how his book is organized. [--And I got this one based on what he said on the radio recently.... Bet the talk-show hosts never read a single page of it.] Matter of fact, the pop-look cover-design (and clever title) invites a fast bookstore buy...but if you'd rather this edition not just collect bookshelf dust, try the library instead/first. It'll likely be found in the business, science or technology section.

--And I'm Still Not Sure why we get nicked big-time for popcorn at the movies. --A generous Two-Stars as a book for the "ordinary" reader, like myself. Four-Stars for the more economically advantaged. It gets a weak Three-Star average.

If you have seen or heard McKenzie being interviewed about his book on TV or radio, you might think that his book is about nothing more than the price of popcorn. He does provide an interesting explanation for the high price of popcorn that is very different than what almost everyone believes. But the book uses simple economic reasoning and examines lots of facts to explain the pricing of a host of different products and services. And he does so in an engaging way, with many chapters written as economic mysteries in which McKenzie begins by presenting the common explanation for a pricing policy (for example, ending prices with a 9), pointing out the problems with this explanation and then challenging readers to see things differently by leading them to a more compelling explanation for the way prices are what they are. I'm not sure this makes McKenzie the Agatha Christie of economics, but it does help make this an enjoyable as well as informative book about prices--something we all have an interest in.

This book is really the best I know for solving many everyday puzzles on pricing. When you have a look at the table of contents, do not put the book aside because you think you already know all the answers: there is much more to it than what you think in the beginning.

With respect to entertainment, it keeps up with "Freakonomics", but with much more economics reasoning in it! Nevertheless, you don't need to be an econ major to understand it (but it certainly would enrich your knowledge as well)

A good book for your night table as well as every econ and business student's desk.

I don't think this book is anywhere near as entertaining as the author, an economics teacher at UC Irvine, thinks. It's meant to be a popular and light-hearted look at a variety of pricing puzzles: those situations where common sense suggests the price either needs to rise or fall for business to pick up. McKenzie tries his hand at explaining a slew of them, such as the pricing of used cars or of campus housing.

It's basically like "Freakonomics," except nowhere near as well-written or mind-blowing. In the preface, the author acknowledges that his book "might appear to emerge only because of the success of other economists who have sought to apply economic reasoning broadly, as Steven Levitt, an economist, with wordsmithing help of journalist Stephen Dubner, has done in the wildly successful book, Freakonomics." (p. XI) He then goes on to insist that no, he was going to write this book anyhow. In fact, he had the idea first, he says, claiming that his 1975 book, "The New World of Economics" accomplished everything that Freakonomics later did - except the sales, I would add.

Anyhow, I would suggest you read "Freakonomics" instead, as that book is much more clearly written and more startling. This book can't even boast an intriguing solution to the titular problem. As if that weren't unforgivable enough, once you finish his section on the pricing of theater popcorn, you still remain to be convinced that he in fact has uttered the last word on the matter.

If you're using this as a supplementary reader to an econ course, it'd better be a micro course, since many of the concepts McKenzie discusses require conversance with basic microeconomics: elasticity, consumer surplus, marginality, etc. Without a command of those, you're going to be fairly lost most of the time. Here's a sample:

"Again what the theater is doing is walking its patrons down their proverbial demand curves. They aren't so much lowering the marginal price of the additional ounces as they are hiking the price on those first few ounces. and this kind of pricing structure allows theaters to effectively charge all popcorn buyers some "admissions price" for concessions, which can be used to cover their many overhead costs in providing concessions and cleanup." (p. 95)

Economists are often criticized for being out of touch with the real world. Although economists might be great at inventing theories, those theories fail to predict real-world outcomes, because the theories overstate how rationally and logically consumers behave.

This book will do nothing to rebuff such criticisms.

In certain sections of this book, McKenzie demonstrates that he has little grasp of how adults and children behave in the real world. For example, in the title chapter of the book, McKenzie attempts to explain why kids' tickets cost less that adults' tickets at the movies. He says:

"One plausible (albeit partial) explanation may be that adults' time is more valuable (given their paying work opportunities)... adults incur greater (opportunity or time) costs than children to search out alternative prices for different movies at different theater."

In other words, McKenzie believes that adults are busy people--too busy, in fact, to comb the newspaper and the Web for the best possible movie ticket prices. However, McKenzie suggests that little kids, having plenty of free time, are avid bargain hunters who can diddle around reading the newspaper and scouring the Web, looking for good deals on movie ticket prices.

Where does McKenzie get that idea? I don't know--does McKenzie know a particularly price-conscious group of six-year-olds? Does he think that, after they finish watching Sesame Street, little children hop online and start comparison shopping on the Web?

He goes on to talk more about kid vs adult movie ticket prices, saying:

"A $3-increase in the child's ticket price represents a 26% increase in the total cost of the child going to the

movie. This means that, everything else being equal, we should not be surprised if young children are more sensitive to any price increase than adults..."

In other words, kids' ticket prices are cheaper because kids can't afford a price hike. McKenzie estimates that kids earn $2/hour, presumably from doing chores around the house or whatever. He estimates that adults earn $40/hr. So adults can pay a few bucks more for a movie ticket, because a few dollars are not a big deal to them. Kids, however, have very low incomes, so they can't afford higher prices.

Because in McKenzie's world, children usually buy movie tickets themselves, out of their own pockets.

Yeah.

After a hard day of raking leaves and watching Sesame Street and drinking juice boxes, little kids wipe the sweat from their brows, get out the newspapers and say, "Gosh, I'm tired. I'd like to relax with an entertaining new release. What's playing at the multiplex? I have seven dollars, what can I go see?"

I don't know--when McKenzie was a kid, did his parents force him to buy movie tickets out of his own allowance? Did he actually did pay attention to ticket prices when he was a toddler?

Who knows. As for the rest of us, when we go to a movie theater, the parents buy tickets for the children, and the children are blissfully unaware of prices.

It's absolutely ridiculous, McKenzie trying to use kids' low allowances as a significant factor in box-office pricing strategies. But McKenzie writes like a stereotypical ivory-tower professor, far, far out of touch with the real world.

# # #

He also suggests that the "real" cost of a movie, for one adult ticket, is actually $90. How does he come to that number? Again, remember that he thinks most adults earn $40/hr. He suggests that time spent at the movies is time that *could have* been spent working, so you have to factor lost wages into the ticket price, as well as the cost of the ticket itself.

Yeah. Uh-huh.

Because, apparently, in McKenzie's world, people generally take off work early to go see a film.

Or perhaps, in his world, people can elect to work whenever they feel like it--"Hey, honey, do you want to go see a movie? No? Well then, I'll go in to work Friday night and work for exactly two hours and earn us an extra eighty bucks. My boss won't mind. Like most people, I *could* work eighteen hours a day if I wanted, so any time I spend going to the movies is costing me in lost wages."

# # #

As for the title question of the book, McKenzie says popcorn prices at the movies *really* aren't that high at all. No, he says, the prices are actually low, after a number of complex factors have been considered.

Then he goes on to say, if the prices were too high, movie goers would revolt by sneaking in their own popcorn. The fact that people rarely sneak in home-made popcorn is proof that concession-counter prices aren't really high at all.

Huh?

How exactly would people sneak homemade popcorn into a movie theater?

He says:

"...hiding is hardly difficult, as some movie patrons can attest! All one needs is a jacket in cold weather and a

large purse..."

Because in his hypothetical world, people have jacket pockets large enough to accommodate a tub of popcorn!

Or, women have purses they can simply fill with popcorn they popped at home. (I wonder exactly how many women he knows who would be happy to stuff their purses full of homemade popcorn, thereby getting their purses all greasy, reeking like butter. Perhaps they are the mothers of the toddlers who bargain-shop for ticket prices in their free time?)

# # #

If you want an economics book for general audiences,and you want to know about the basics of prices, try Thomas Sowell's Basic Economics. Basic Economics 4th Ed: A Common Sense Guide to the Economy

If you want an entertaining, well-written book about the secret economic forces behind human behavior, try Freakonomics. Freakonomics: A Rogue Economist Explores the Hidden Side of Everything (P.S.)

If you're already read both of those, and you're desperate for something fresh to read, you might try Why Popcorn Costs So Much At The Movies. However--as other reviewers have noted--this book is rife with classroom-style jargon, and it reads more like a textbook than a book for general audiences. It often feels like a chore to read, rather than a pleasure, and contains some truly bizarre assumptions about human behavior.

Of all the good books I've read recently, "Why Popcorn Costs So Much at the Movies And Other Pricing Puzzles" is almost certainly the best. The book looks at a large number of pricing puzzles and tries to provide rational explanations for why they might be the case. Largely, these focus on the degree to which different pricing structures arise in different situations. For example, why should manufacturer's rebates or coupons exist? If everyone redeems the rebates or has the coupon, there's no reason to bear the transaction cost of the extra hurdle, and so firms should just set the discounted price as the regular price. On the other hand, if no one uses coupons or rebates, there's no reason to even offer the discount at all. So the only time when coupons or rebates could exist is when only a portion of consumers will take advantage of them - and then you get into the puzzle of why some consumers might want to take advantage of them and others would not. McKenzie takes great pains to illustrate the possible ways to resolve these puzzles.

There is also a strongly Hayekian component to the book. The presumption underlying most of his cases is that the people with the incentives to get prices right are more likely to have done so than the casual observer. The fact that a puzzle exists is taken as evidence that the puzzled observer probably doesn't fully understand the situation (and not that the economic agents are stupid for acting in such a baffling manner). The best parts of the book, however, come when McKenzie reveals a puzzle that you thought was solved. He makes strong cases for why often people's intuition about the nature of an economic phenomenon are often misguided - which opens the reader's eyes to the more interesting underlying dynamics.

Overall, I recommend this book to anyone and everyone who is even a little interested in understanding economics as the science of making decisions. Most of his pricing puzzles go a long way to explaining many of the basic concepts in economics in a fun and fascinating way that is easy to connect to.

I appreciate that McKenzie is an expert and an academic, and the various topics addressed in the book did peak my interest. But honestly, this book is very, very boring. It reads much duller than any college econ textbook that I can recall from my younger days. I am a big fan of the pop economics genre, but this tome belongs only in a classroom and not in the mainstream.

The book takes some of the complexities of economics and puts them in laymen's terms. Popcorn prices, airplane pricing and other items we pay for each day. McKenzie uses everyday scenarios to show how economics affects all of us each and every day. Very entertaining.

After reading the fun, light, breezy Freakonomics and Super Freakonomics, I gave this book a try. The author acknowledges Dubner and Levitt's work on those two books as inspiration to write his own. However, Dubner and Levitt got it right. One is an economist and professor, the other is a writer. Unfortunately McKenzie (a professor) tries to write this book alone, without the help of a professional writer. It comes off more like a textbook - lots of theory and principles - and less anecdotal prose. This could be half the number of pages and be much more entertaining. By the way, I do have a degree in economics and found it to be boring most of the time, skimming over several paragraphs just to cut to the chase.

[...]

Richard McKenzie's book is a thought-provoking journey into the motivations behind companies that offer pricing incentives, and how we, as consumers, respond to them. If you enjoy books like Robert Frank's "Economic Naturalist" or Dan Ariely's "Predictably Irrational," you will really like this book. The stories are often tied to economic principles, but in a way that everyone can understand.