When is free hotel Web access not free?

How the dismal science applies to your life.
Feb. 1 2006 12:11 PM

How Much Should Hotel Web Access Cost?

Sometimes it's free. Sometimes it's $20 a day. Why?

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That's pretty good. Unfortunately, when I apply the same theory to an analogous problem, the results are far less satisfying. The other problem is one I revisit every few years: Why is popcorn so expensive at the movie theater?

In every important respect, the popcorn pricing problem is identical to the Internet pricing problem. If Jack will pay $10 to see the movie and Jill will pay $12, but Jack really loves popcorn, then a greedy profit-maximizing theater owner will offer to shower Jack with free popcorn until he's willing to pay $12 to get in.

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But if Jack and Jill are each willing to pay $12 to see the movie, that same greedy profit-maximizing owner will charge them both $12 and bleed Jack dry at the popcorn stand.

Sometimes the numbers should work out one way; sometimes the other. Yet in the real world, popcorn, unlike wireless Internet, is never free.

It's logically possible that by pure coincidence the numbers at every movie theater in the world all work out the same way, while the numbers at hotels work out one way half the time and the other way the other half. But "pure coincidence" theory is even less satisfying than the "differential greed" theory. There must be something I'm missing that makes popcorn essentially different from Internet access. I remain stumped.

Steven E. Landsburg is the author, most recently, ofMore Sex Is Safer Sex: The Unconventional Wisdom of Economics. You can e-mail him at armchair@landsburg.com.

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