Not the right building in Bombay

This is an interesting little test of the judicial system – you know, those told that the Beatles were a popular beat combo – on the subject of property rights. The Bombay High Court has just failed this test too. The question is, multiplex cinemas, why is the food so expensive in them? The correct answer is because the owners of multiplex cinemas make a profit in that manner. According to the court this doesn’t wash. In fact, they seem not to have even considered the argument in that manner:

The Bombay High Court has ruled that food items and bottled water be sold at regular prices inside multiplexes. The directive was issued by a division bench of Justices S.M. Kemkar and M.S. Karnik last week in response to a Public Interest Litigation (PIL) filed by Mumbai resident Jainendra Baxi. He had challenged the prohibition on carrying outside food in movie theatres and multiplexes across Maharashtra.

The economics here is simple enough. The people who order food inside the cinema, at those higher prices, subsidise the others who only buy the ticket to see the movie. Sure, that’s not the first round outcome, but it is the competitive equilibrium. Cinema owners being able to profit from food makes the basic ticket cheaper.

The rights based part is also simple enough. I’m running a business, I can and should be able to decide how people access that business. If I’m running a restaurant I’m entirely at liberty to insist that you only get to consume things at my table that you’ve bought from me. Even if I show a film at the same time.

Another way to put this is that the judges have just failed Chesterton’s Fence. They’ve not grasped why the limitation is in place to start with, therefore they see nothing wrong in ridding everyone of the limitation. And the net effect of this is going to be higher multiplex cinema ticket prices for everyone in Maharashtra.

Well done there, eh?

And yes, we do know this result:

Movie theaters are notorious for charging consumers top dollar for concession items such as popcorn, soda, and candy. Are moviegoers just being gouged?

Research from Stanford GSB and the University of California, Santa Cruz suggests that there is a method to theaters’ madness—and one that in fact benefits the viewing public. By charging high prices on concessions, exhibition houses are able to keep ticket prices lower, which allows more people to enjoy the silver-screen experience.

The findings empirically answer the age-old question of whether it’s better to charge more for a primary product (in this case, the movie ticket) or a secondary product (the popcorn). Putting the premium on the “frill” items, it turns out, indeed opens up the possibility for price-sensitive people to see films. That means more customers coming to theaters in general, and a nice profit from those who are willing to fork it over for the Gummy Bears.


The money’s got to come from someone, so why not from those willing to pay more?

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  1. It has always amazed me how cinemas and ballparks abuse the customers by taking advantage of their captive status, but you’re right, it is nothing more sinister than extracting money from patrons who want to pay it, to the benefit of patrons who don’t. The judges see a “fairer” rule and impose price controls by threat of armed force; as usual, they lack important information and will pay no price for deciding wrong.

    The Indian judiciary is bound to wait until a case is brought before them (“Public Interest Litigation,” hah!) but then seem to issue binding decisions on that aspect of society and economy, in competition with the legislature, rather than merely decide the case.

    • Who is to say which revenue dollar pays which cost? As Tim said, “that’s not the first round outcome, but it is the competitive equilibrium.” A venue first setting out food and drink may have a plan for the contingency where sales are zero, but after it becomes a dependable revenue source, it permits management to adjust all other prices to compete better.

      • I don’t know the details, but the studios have a call on ticket revenue, not food. They are not equivalent. Maybe (surely) you can’t offer the IP content of the movie for less than is allowed. Either way, no business of the court.

      • I think you’re right (though I don’t know how it’s done in India, and in any case it could be renegotiated). Perhaps the Bollywood studios filed a friend-of-the-court brief: Put caps on their other revenue, and the charges we get a cut of will increase!

  2. “I understand they are a popular beat combo, m’lud”

    Lawyer friends tell me that judges will do this sort of thing deliberately, because they’re aware that the case transcripts might be scrutinised in a couple of hundred years time, when “Who were The Beatles?” will be a pub quiz question to which no-one knows the answer (along with “What was the EU?”).