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.