The first question deals with the reason why movie theaters offer discounts to students on movie tickets but they never do so on popcorns. It is shown that popcorns are classified as concessions and hence offer undivided revenue to movies. Additionally, concessions enable the theaters to carry out price discrimination since the most moneyed clients are the ones who can buy for them hence allowing the theaters to make more profits. The second question address the issue of having fewer grocery stores in modern times than in the 1930s. It is ascertained that change in market dynamics is the reason behind such a trend. Lastly, the last question is addressed by the fact that there are much greater economies of scale in the construction of roof framing than wall framing hence accounting for why wall framing is usually built at the construction site while roof framing is more often prefabricated.
Research in relations between businesses and customers shows that there are a couple of reasons as to why theaters would offer discounts on admission tickets but not on popcorn. First, popcorn is categorized as concessions. Popcorn and other concessions are set above their costs. Studies have shown that the application of high prices on concessions may lead to profitable price phenomenon, which is referred to as “metering.” In this case, the main idea is that the amount that a customer is willing to pay for the secondary goods gives an idea of how much the customer would be willing to pay for the primary goods, which is the admission price. If there is a positive correlation between the two goods, then they lead to aftermath purchases, which allow the extraction of a greater total price, that is admissions and concessions. Additionally, they give the theaters information on the movies which are in demand during a specific period hence making the theaters to concentrate on such movies to ensure maximum profitability (Orbach and Liran Einav 130).
Moreover, studies have shown that movie theaters don’t reap a lot from movies. In retrospect, it is movie studios that do so. In essence, there are revenue sharing schemes that are subject to change over time. In some scenarios, studios are known to take advantage of the release of films whereby they hike their demands during the first weeks of a film’s release and tone it down with time. As such, studios always take bigger chunks of the tickets’ proceeds in addition to placing unfavorable conditions on playing their films. Theaters can decide to raise ticket prices, but the idea wouldn’t be appealing if 70% of the proceedings went to studios. In this case, the one major thing that does not have to be shared with studios are concessions. In as much as they might account for only 20% of gross revenues, they might present as much as 45% of theater revenues (Orbach and Liran Einav 132). From such a point of view, it is evident why theaters would be willing to discount on tickets but not on popcorns.
Price discrimination offers a plausible reason behind the phenomenon as well. Popcorns and all other concessions in general allows the theaters to charge different amounts for the same movies hence helping in maximizing the profits. For example, for a person going for a date, the willingness to spend might be higher than that of a single person taking himself/herself to the movies. From the theater’s perspective, it would be desirable to figure out the people willing to pay more for the movie experience and hence charge them more than others. But this would be very difficult to implement. As such, the theaters provide something that only the spenders are willing to buy; popcorn. The bottom line remains to be the maximization of profits. As such, the theaters will not be willing to discount on their activity that gives them the most income albeit it not being obvious to the common moviegoer. Moreover, purchases take place in groups at the theaters. In this case, a student buying popcorn at a high price will most likely influence the other students to do so hence maximizing the sales. Additionally, this type of arrangement whereby the movie tickets are subsidized whereas the popcorn does not play a psychological trick on the mind of a consumer whereby a person thinks that since the ticket part has been subsidizing, yet her or she pays more for the popcorns should. In this case, the consumer or the student will have the perception whereby he/she feels that there is fairness in the price balancing and hence will pay for the tickets and still buy the popcorns hence making the theater to gain from both products.
Lastly, the use of arbitrage is also a plausible reason behind the phenomenon. Arbitrage is practical in some cases but not in others. Student discounts on tickets enable theater operators to segment their markets because it is not possible for one person to see a movie at a low price and then sell the experience to someone else at a higher price. Similarly, it is practical for lawyers and doctors to charge different people different prices on the basis of differences in price elasticity of demand. But such market segmentation is more difficult for products like popcorn. In this case, if the theater operators attempted to sell popcorn for $1 to students and for $3 to adults, some enterprising student would seize the arbitrage opportunity, selling popcorn to disgruntled adults for only $2 (Orbach and Liran Einav 134). Moreover, under the pressure of competition from other arbitrageurs, the price differential would fall until the price differential was barely sufficient to make it worth the students’ time to engage in the transaction hence having premium priced popcorns accompanying discounted movie tickets is an arrangement that can work effectively with students.
One major reason behind there being fewer grocery stores in modern times than in the 1930s may be the changes that have occurred in the market. The contemporary market is rather different from that one of the 1930s. First, the population demographics have changed and hence the type of life that existed in the yonder years doesn’t exist anymore. Additionally, the market forces have changed hence the environment which was fertile for opening up of small stores is no longer a thriving one for the establishment of grocery stores. It can be agreed that not only are there fewer groceries in modern times than in the 1930s but the current stores are bigger than those of the 1930s. In essence, has been observed that the grocery industry is in its mature stage. The modern history of the evolving of grocery stores shows that initially there were many but small groceries stores than at present. This was the period when retail shops were very profitable business ventures. However, with the modernization of towns and with stiff competitions, mergers have taken place and hence the once grocery market that was characterized by many small stores is now comprised of fewer but mega stores (Eisenhauer 130). These stores can withstand current market dynamics such as stiff competition from existing and upcoming stores. Moreover, the advent of the internet has changed the way in which groceries in modern times and especially in urban settings operate. In the current times, people strive to go for the most convenient services than they did before. As such, if there were a way in which people would have their groceries brought to their homes without necessarily visiting the grocery stores, then they would go for such services. However, the gap has already been filled by major grocery stores which deliver brig products to customer’s doorsteps at the click of a mouse. Indeed, this type of development has led to losing the need for having many physical grocery stores. In fact, the reduction in physical grocery stores has been supplemented by the increase in virtual stores.
Change in the living standards fueled by technological advancements is also a major reason behind this trend. Initially, people depended on fresh food products to be able to make their foods (Eisenhauer 128). As such, shopping entailed constant trips to the grocery to purchase raw materials which would be used for preparing for the day’s meal. However, with advancements in technology, foods are processed in companies in contemporary times hence what a customer needs to do is just to warm the food. Additionally, storage facilities are of good quality. Hence a person can do groceries which can last for a week in the house. These types of developments have reduced the need to have to go to the grocery stores. As such, the reduced need to go to the grocery store and the ability to store food products for long have made it unnecessary to have small grocery stores at every corner of the town but rather to have few but bigger stores whereby a customer can shop for items which can last long. Additionally, in contemporary times, instant foods such as instant noodles and coffees or cereals exist. Additionally, these are food products that only require a customer to add hot water or some milk and the foods are ready for consumption. Such was was not the case in the 1930s since most foods had to be prepared at home and needed a longer time to prepare than the presents. As such, there was more need for groceries in the 1930s to provide the cooking materials than in modern times.
Current observation on the contemporary market shows that grocery retailing, like other forms of retailing, is characterized by strong economies of scale. In this case, it confronts the usual trade-off between direct production cost and transportation cost. Throughout this century, changing patterns of automobile ownership have affected the pattern of grocery store size and location in the United States. Initially and in the 1930s, most families did not own cars and had to do their shopping on foot. Regarding our expression for the optimal number of outlets (Equation 13.10), this meant a high value of t, unit transportation cost. Today, of course, virtually every family has a car, which has led people to take advantage of the lower prices that are possible in larger stores. One exception to this general pattern in Manhattan. Even today, most Manhattan residents do not own cars. Moreover, population its density is extremely high, which translates to a high value of L in Equation 13.10.The combined effect of high values of L and t is that very few Manhattan residents have to walk more than two blocks to arrive at their nearest grocery store. Los Angeles’ total population is higher albeit being spread over a larger area scale hence it is the culture of the region for families to own at least one automobile. This leads to a phenomenon whereby Los Angeles’ stores are larger and wider apart, unlike those in New York. Also, the culture of Los Angeles is different from that of Manhattan. In Manhattan, most houses are residential, and hence the city is home to a great number of families. On the other hand, Los Angeles is more of a business hub which supports many businesses in the film industry hence is home to fewer families. As such, Manhattan can house more grocery stores since it has a ready market for the groceries being sold, especially due to the eat-at-home culture exhibited by Manhattans. In retrospect, this is not the case in Los Angeles as the non-family way of life would support the establishment of many grocery stores.
The fact that there are much greater economies of scale in the construction of roof framing than wall framing accounts for why wall framing is usually built at the construction site while roof framing is more often prefabricated. In this case, it is imperative to ascertain that there are two key differences between wall and roof framing. First, cutting the lumber for roof framing involves many complicated angle cuts, whereas the right-angle cuts for wall framing are much simpler (Maly and Tooley 42). Also, it should be noted that roofing systems adhere to a type of uniformity whereas the walls encompass differences brought about by placement of windows and doors hence making it preferable for the roofing to be prefabricated. The angle cuts required can be made much more rapidly if a frame or “jig” can be built that guides the lumber past the saw-blade at just the proper angle. It is economical to set up such jigs in a factory where thousands of cuts are made each day with specialized equipment, but it usually does not pay to use this method for the limited number of cuts required at any one construction site. Likewise, automated methods are easy to employ for roof framing by virtue of its uniformity. On the other hand, the idiosyncratic nature of wall framing militates against the use of automated methods.
The aspect of labor is another reason why builders use prefabricated frames for roofs but not for walls. Indeed, fitting the roofing according to the dimensions of a house can be time-consuming when done on the construction site. Additionally, doing so on the construction sites requires specialized knowledge and more time to fit the roofing frames according to the plan of the house. The fact that human errors can lead to a faulty roof frame also makes taking such an approach to be less desirable (Maly and Tooley 44). On the contrary, using prefabricated framing for the roof saves on a lot of construction time. Saving on time inevitably leads to saving on the cost of construction. Moreover, using prefabricated framing for the roof reduces the chances of human err taking place hence the reason why contemporary constructors would prefer prefabricated framing for the roof rather than for the walls. The aspect of complexity should also be taken into consideration. When constructing wood-frame houses, the design of the rooms has to be customized to fit the specifications of the client, something which is done best when implemented at the construction site. However, the design of the roofing doesn’t encompass much customizing. As such, it can be made in the factory setting and still be able to meet the requirements of the house. In this case, since the contemporary constructors prefer the methodology which encompasses the least handwork, then going for prefabricated framing for the roof is the most convenient approach to follow. Lastly, it is prudent to check the effectiveness of labor in roofing. In conventional roofing, the roof frames were built by carpenters on the construction site, an action which left a lot to chance for errors since the roof’s strength was based on the builder’s opinion. In retrospect, the issue of errors is addressed when using a prefabricated framing for the roof since it is built in a specialized factory setting by specialized engineers with the aim of accommodating a specific roofing design which adheres to predetermined building codes.
Lastly, using prefabricated framing for the roof improves on construction speed. Prefabricated frames are typically installed within a single day. Contrariwise, constructing the roofing frames on the construction site takes more than a week. As such, to safe time, contemporary constructors prefer prefabricated framing for roofing. In retrospect, constructing the wall, a factory would essentially entail the whole house being made at the factory premises something that the constructors would never wish for, unless if they owned the company doing the construction. Additionally, roofing is a sensitive activity that can be easily affected by prevailing weather conditions (Maly and Tooley 44). Using prefabricated framing ensures that the roofing is done within a short time and hence the construction is less likely to be affected by bad weather.
In conclusion, it can be ascertained that market forces as well as changing market dynamics are behind a lot of decisions made by businesses. Businesses will strive to implement decisions which encompass the most benefits in terms of economics of scale even if the benefits are not conspicuous. Also, change in customer demographics can lead to significant changes in a given market such as the issue of having fewer grocery stores in the U.S in present times than in the 1930s. Also making decisions such as using prefabricated roofing and not offering discounts on popcorns while offering discounts on tickets on movie goers might look like an inconsequential action but it focuses on economics of scale to ensure that businesses get the maximum profits from their endeavors.
Eisenhauer, Elizabeth. “In poor health: Supermarket redlining and urban nutrition.” GeoJournal 53.2 (2001): 125-133.
Maly, John, Robert Baynit, and Michael Tooley. “Computerized system and method of collaborative structural frame development.” U.S. Patent Application No. 10/271,122.
Orbach, Barak Y., and Liran Einav. “Uniform prices for differentiated goods: The case of the movie-theater industry.” International Review of Law and Economics 27.2 (2007): 129-153.