Time and the Economy, Essay Example

Time and the economy have not been kind to the movie theaters. Newspapers are continually report closings, even for theaters tied to big names such as Regal or Carmike. The Washington Post’s Marc Fisher goes so far as to applaud the closing of the Union 9 Theater in Washington D.C. Although Fisher disliked the theater for social reasons, the reason it closed was, he says, that it was out of money. When theaters charge $8 or more for a ticket, it is easy to think that they are prosperous. But $8 ticket prices may very well be the reason theaters are facing such woes.

Blayne Clements of Clarksville Online suggests that movie theaters have committed virtual Seppuku by failing to abide by the laws of supply and demand. For instance, says Clements, movie goers pay the same price on the opening day of a film, when demand is hight as they do on closing day when demand is low. Likewise, it costs the same amount to see unpopular films as it does to see a hot summer blockbuster. The consequences of this, says Clements, are that more people are turning to video rentals and that movie theaters are grossing very little for the most popular rentals. If, he says, theaters operated according to the laws of supply and demand, they could slow down their extinction.

But Clements is merely making an educated guess. He uses only one hard example of DVD sales taking away revenue from movie theaters. Therefore, a series of tests should be made  to try to prove the following hypothesis: Operating according to the laws of supply and demand would increase theater prosperity.

The study would be comprised of a business dynamics simulation, in which 100 virtual theaters would be created. 50 of these would operate according to standard theater operations, charging the same price for popular movies as for unpopular movies. 50 would adjust their prices based on the popularity and demand for each film. The simulation would run over a course of three months, after which the profits for each company would be totaled and compared to the hypothesis.