Popcorn-Gate!
There are perfectly reasonable questions to ask about ethanol production, such as:
- What’s the impact on global food prices? (A 3 percent increase, according to USDA.)
- What’s the impact on oil and gas prices? (A 15 percent decrease, according to Merrill Lynch.)
- What’s the impact on emissions? (Reductions across the board, according to EPA.)
And then there’s the silliness.
The Associated Press and AdAge have reported that ethanol is driving up the prices of — wait for it — movie tickets! They cite a study by Dr. Ricard Gil, an associate professor of economics at UC Santa Cruz.
On its face, the story seems at least as logical as any other wild, three-rail shot: Ethanol production affects field corn prices, which presumably affect popcorn prices (right?), which must in turn — um, er — cause theaters to boost movie ticket prices.
Well, not exactly, according to the man who wrote the study.
Dr. Gil tells F4T his research has been mischaracterized.
“Our research in concession pricing at theaters does not consider the specific connection between ethanol production and movie ticket pricing,” he says in a statement (pasted below). An increase in concession costs could theoretically lead theaters to raise ticket prices, but there are many other factors involved.
It doesn’t take an economics degree to understand why the wild, three-rail shot misses its mark, though. A little table-napkin math will do: The farm gate price of popcorn in 2007 was 13 cents a pound. So the $5 you spend on a tub of popped corn at the movies would buy you 38.5 pounds of un-popped corn at the farm gate — enough to make 256 tubs of popcorn that a theater would sell for $1,280…
Oh, never mind; the story is a summer blockbuster. Why ruin the fun with facts?
Sources:
Statement by UC Santa Cruz Assistant Professor of Economics Dr. Ricard Gil: “Our research in concession pricing at theaters does not consider the specific connection between ethanol production and movie ticket pricing. Instead, it analyzes how mark-ups in concessions are used to price discriminate among consumers that could afford paying different prices for their movie tickets. As a result, increases in concession costs and therefore decreases in concession mark-ups may increase ticket prices. Hence, if the price that theaters pay for popping corn were to rise by 40 percent — the same as corn futures — our model shows that the impact on movie concession and ticket pricing would differ from small to large depending on a number of factors such as the sensitivity of popcorn demand and movie demand to price increases and the importance of popcorn revenues relative to revenue of all products sold in concession stands.”
UC Santa Cruz press release. “Why Does Popcorn Cost So Much at the Movies?” February 21, 2008.
Gil, R and Hartmann, W. “Why Does Popcorn Cost So Much At the Movies? An Empirical Analysis of Metering Price Discrimination.” Working paper. UC Santa Cruz. November 2007.
“Movie ticket prices expected to jump as price of corn increases,” by Claude Brodesser-Akner. Ad Age, May 19, 2008.
Iowa Renewable Fuels Association. “Popcorn Propaganda vs. Facts.”
