Price Discrimination in Cinema Market Research Paper

Price Discrimination in Cinema Market - Research Paper Example A price discrimination strategy is a common tool adopted by cinema operators for maximizing business profit. Through the implementation of a versioning or product line stretching program, these companies charge higher prices to same groups of customers for superior and newer services. Golden Village charges $8.50 per movie ticket on weekdays. However, for the same shows, the company sets $ 11.50 price per ticket on weekends. At the same time, the company charges $ 4.50 per ticket for the show on weekdays for senior citizens; whereas, charges $7.00 for the same ticket on the same day for young students. Thus, if observed in details, the company discriminates on its ticket prices on the basis of time, the degree of iteration of customer visit and age. From the above analysis, it can be claimed that the company implements third and second-degree price discrimination strategy while setting prices of its movie tickets. Under the regime of second-degree price discrimination, the company ch arges higher for each ticket when a movie new releases in the market and lowers the ticket prices gradually.Given that customer’s willingness to pay falls with time, a price of the ticket for a movie released also drops. Through third-degree price discrimination, the company charges separate prices to different groups of customers, as per their age and time of ticket purchase. An elasticity of demand measures degree of responsiveness of rate of change in quantity demanded with respect to a rate of change in the price level of a product or a service.