Would Ticket Holders Pay $25 if They Got Unlimited Food? One Movie Theater Decided to Find Out

This article describes one movie theater's experiment with bundling unlimited food with a movie (WSJ Oct 2021). The scheme also charged a higher price on weekends.

Peloton Slashes Price on Exercise Bike, Predicts Slowing Growth

This article illustrates complex pricing. (WSJ, Sep, 2021) It also illustrates that firms may sacrifice profits today for greater profits tomorrow. Peloton bikes and sbscription services are complements. The Bike is a substitute for the Bike+.

Do these pricing decisions conform with the guidelines developed in ECON 610?

"The lowest-cost Peloton Bike will sell for $1,495, down from $1,895. The higher priced Bike+ still goes for $2,495. "

"In a letter to investors, executives said they were trying to add as many customers to its subscription workout classes as possible, even though the price cut, coupled with higher shipping costs, would depress near-term profits."

"The company reduced the Bike to $1,895 from $2,145 in September, when it launched the more-expensive Bike+."

Is this the end of Barbie doll pricing for printers?

New printers are NOT charging a high price for refills of ink. (WSJ, March 2021) My question is, "What took so long?" Were consumers unable to look ahead and then reason back?

Look ahead and reason back

Tractor manufacturers are trying to lock farmers into getting repairs from their dealers. (WSJ, March 2021) One question is, "Were the manufacturers hoping to use Barbie doll pricing?"

This article finds that right to repair legislation can result in a lose-lose-lose outcome.

1. Consumers may lose because manufacturers increase the price of the tractor when the link between tractor sales and revenues from repairs decreases. 
2. Producers may lose because the increase in the price of tractors fails to offset the lose of revenue from repairs. 
3. The environment may also lose.

Barbie doll pricing for printers

Planet Money (Feb. 2021) describes how companies charge low prices for printers to sell high-price ink and make substituting third-party ink difficult.

Is this an example of 1st degree price discrimination?

"When a woman gets a caesarean section at the gleaming new Van Ness location of Sutter Health’s California Pacific Medical Center, the price might be $6,241. Or $29,257. Or $38,264. It could even go as high as $60,584.

"The rate the hospital charges depends on the insurance plan covering the birth. At the bottom end of the scale is a local health plan that serves largely Medicaid recipients. At the top are prices for women whose plans don’t have the San Francisco hospital in their insurers’ network" (WSJ, Feb. 2021).

Pricing during COVID

Here are great examples of firms using better pricing techniques during COVID (WSJ, Dec. 2020).

The Internet is a scary place

"Price customization" is common on the Internet (FindLaw, June 2005).

Here is a short history of pricing and how the internet is opening up new avenues for firms to follow to increase price discrimination and profit (The Atlantic, May 2017).

The Demand for E-Cigarettes is Elastic

"We then calculate an e-cigarette own-price elasticity of -2.6 and a positive cross-price elasticity of demand between e-cigarettes and traditional cigarettes of 1.1, suggesting that e-cigarettes and traditional cigarettes are economic substitutes" (Cotti, Chad D. and Courtemanche, Charles and Maclean, Catherine and Nesson, Erik and Pesko, Michael and Tefft, Nathan, The Effects of E-Cigarette Taxes on E-Cigarette Prices and Tobacco Product Sales: Evidence from Retail Panel Data (January 2020). NBER Working Paper No. w26724. Available at SSRN: https://ssrn.com/abstract=3535316). 

Two questions.

1. If the government increases the tax on e-cigarettes by $1, what happens to the optimal price and unit sales?
2. Given your answer to (1) and presuming that the price of traditional cigarettes remains constant, what happens to unit sales of traditional cigarettes?
3. What is the quick estimate of the price elasticity facing an individual seller if the market contains 4 sellers? "We calculate a Herfindahl–Hirschman Index of 0.251 for e-cigarette retail purchases".

Raise price on a good when it stops being a complement

The WSJ (Dec. 2019) discusses the increase in concert tickets. "As piracy decimated recorded music sales starting in the early 2000s, artists began to rely on touring, ever more so in the past decade."

Versioning, bundling both of the same good and with complementary goods, and two-part pricing

This story reports that the SF 49ers have bundled season tickets (a bundle of single-game tickets) and unlimited food and beverages. This package combines versioning, bundling both of the same good and with complementary goods, and two-part pricing.

Facebook could increase profit by using price discrimination

This paper explores how Facebook could profitably employ price discrimination. "We find that a profit maximizing platform should decrease fees or advertising for users who elastically demand the platform (the direct effect) and who create high amounts of network value for other profitable users who themselves demand the platform elastically(the network effect). ... Facebook could increase profits by decreasing the amount of advertising on some market segments and increasing it for others.|

Expensive popcorn in movie theaters = indirect price discrimination.

This article from the Hustle (Sept. 2019) describes pricing in movie theaters. Some key points.

1. The commission theaters must pay on revenues from ticket sales reduces the incentive to increase the price of a ticket.
2. "This strategy of selling a primary good at cost (or at a loss) and making the bulk of profit on a complementary good (like popcorn) is a form of the widely employed razor and blades business model. Microsoft, for instance, will sell its Xbox consoles at a steep loss to get people to buy them, then make healthy returns on games and accessories."
3. "Gil, along with a colleague from Stanford, analyzed 5 years’ worth of revenue data from a major movie chain and found a different motivation for expensive popcorn: Theaters use it as a way to price discriminate, or charge customers varying prices for the same experience (in this case, seeing a movie)."