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Plasmon comments on Open thread, Jan. 26 - Feb. 1, 2015 - Less Wrong Discussion
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I imagine the following:
Suppose 2 movies have been produced, movie A by company A and movie B by company B. Suppose further that these movies target the same audience and are fungible, at least according to a large fraction of the audience. Both movies cost 500 000 dollars to make.
Company A sells tickets for 10 dollars each, and hopes to get at least 100 000 customers in the first week, thereby getting 1000 000 dollars, thus making a net gain of 500 000 dollars.
Company B precommits to selling tickets priced as 10 f(n) dollars, with f(n) defined as 1 / ( 1 + (n-1)/150000 ) , a slowly decreasing function. If they manage to sell 100 000 tickets, they get 766 240 dollars. Note that the first ticket also costs 10 dollars, the same as for company A.
200 000 undecided customers hear about this.
If both movies had been 10 dollars, 100 000 would have gone to see movie A and 100 000 would have seen movie B.
However, now, thanks to B's sublinear pricing, they all decide to see movie B. B gets 1270 000 dollars, A gets nothing.
Wolfram alpha can actually plot this! neat!
The movie industry actually does this, more or less. It's not a monotonic function, which makes analysis of it mathematically messy, but it's common (albeit less common now than twenty years ago) for films to be screened for a while in cheaper second-run theaters after their first, full-priced run; and then they go to video-on-demand services and DVD, which are cheaper still.
Wouldn't surprise me if similar things happened with 3D projectors and other value-added bells and whistles, but I don't have any hard data.
If movie A sells for 9 dollars, people able to do a side-by-side comparison will never purchase movie B. Movie A will accrue 1.8 million dollars.
I don't see what sublinear pricing has to do with it unless the audience is directly engaging in some collective buying scheme.