An Academic Book with a Populist Title – Useful for Anyone Interested in Pricing or Its Effects

The book Why Popcorn Costs So Much at the Movies is an academic book wrapped in a populist title. It provides insight into a variety of pricing mysteries, such as the price of popcorn at the movies, why so many prices end with “9” and the economics of rebates. Although what Richard McKenzie, Professor of Enterprise and Society in Paul Merage School of Business at the University of California of Irvine, has written is fundamentally an economic text book, it is useful for anyone involved in pricing a product.

For instance, the chapter dealing with price discrimination is useful for anyone who is involved in pricing strategy. He gives an example of one such pricing discrimination whereby the web retailer Amazon charges different prices for books on its U.S. site versus its U.K. site. For various reasons, U.K. students are more price sensitive regarding text books and are not willing to pay as much as U.S. college students.

There are many subtle pricing and marketing tactics McKenzie points out throughout the book, including one that retailers employ to make rebates more attractive (the font used for the rebate price is generally larger than the pre-rebate price of a good, so the consumer notices the lower price).

He discusses why some items are ‘free’. In doing so, he provides an example of his own video series that he makes available on the web at no charge. These video modules, which can be found at http://media.merage.uci.edu/McKenzie/Modules.html are a valuable complement to his book.

I read with great interest his description of the endowment effect. That is, people are more likely to keep something once they have it in their possession. I found this to be the case recently with my purchase of a smart phone which I intended on returning after reviewing. Once I got the Smart-Phone in my Internet-addicted clutches, however, those plans were torpedoed and the price of giving it up was greater than the price I had paid.

The book touches upon social issues and the unintended consequences of pricing. He provides the fairly well-known example of how ethanol subsidies led to higher prices for corn, which resulted in higher food prices and the unintended consequence of increased world hunger. He makes other interesting arguments including one that suggests the 9/11 terrorists have killed more people indirectly due to the effects of increased security at airports, as compared to the direct results of their horrific actions.

Reading like a series of business paper op-ed pieces, this book can be read in bite-size chunks. With a variety of topics, it has something for students and professionals, alike.