This Question: 1 47 of 50 (25 complete) All the local theatres charge difforent

Question

This Question: 1 47 of 50 (25 complete) All the local theatres charge difforent prices to different groups of customers for theatre admission but not on bottled wator Which of the following is a reason for this? O A. because the demand for botled water is very high relative to the domand for movne admissions O B. because it is easier to limit resale in movie admissions but not in bottled water o C. because the markup on botlid O D, because the cust of operating a concession otand in a theatre is very high compared to the cost of showing a movie water is very high and movie theatres do not want to forgo this source of revenue

Explanation / Answer

One of the reasons why theatres charge different prices for Movie Admissions and the same price for water bottle relates to the essence of the commodity which they are selling. When they are selling admissions, it is something which can be resold and must be resold in order to generate the revenue. Understand that as the movie screens get older, the variable cost of operating the movie theatres becomes lower and lower. And thus there are opportunities to sell more and more. Thus, in order to promote the sales of the service, usually price differentiation is there or customers are charged different prices for the type of seats they may want to prefer in the movie hall.

Now, think of water. Is it something which can be resold by the firm? No !. It is essentially a product, which once sold cannot be sold again. Same water bottle sold will mean one lesser in the stock and to serve a new customer you have to have one bottle in stock. Differentiated pricing in water might imply lesser water bottle being sold. The only way to have more revenue through water bottle is to have sold as many as possible during the movie. Thus, the differentiated price could mean people not buying the water bottles or lesser sales.

Thus, Local theatres have control over the resale of Admissions but not the water bottles and that is the reason we see different types of pricing strategies for the two.

Thus, Option B is the correct answer.

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