Cheap Tuesdays and the demand for cinema

- We exploit rare price variation to estimate cinema demand using a rich dataset.
- We employ a random coefficients discrete choice model with spatial characteristics.
- Cheap Tuesday ticket prices lead to market expansion rather than substitution.
- Demand is elastic, suggesting systematic overpricing.
- Simple price discrimination practices would improve profitability.

Many movie markets are characterised by extensive uniform pricing practices, hampering the ability to estimate price elasticities of demand. Australia presents a rare exception, with most cinemas offering cheap Tuesday ticket prices. We exploit this feature to estimate a random coefficients discrete choice model of demand for the Sydney region in 2007. We harness an extensive set of film, cinema, and time-dependent characteristics to build a rich demand system. Our results are consistent with a market expansion effect from the practice of discounted Tuesday tickets, and suggest that cinemas could profit from price dispersion by discounts based on observable characteristics.