Epistemic Status: Lightweight
Yesterday, my wife and I went out to see Ocean’s Eight (official review: as advertised). The first place we went was a massively overpriced theater (thanks MoviePass!) with assigned seating, but they were sold out (thanks MoviePass!) so we instead went to a different overpriced theater without assigned seating, and got tickets for a later show. We had some time, so we had a nice walk and came back for the show.
When we got back, there was nowhere for us to sit together outside of the first two rows. They’re too close, up where you have to strain your neck to see the screen. My wife took the last seat we could find a few rows behind that, and I got a seat in the second row. It was fine, but I’d have much preferred to sit together.
It was, of course, our fault for showing up on time rather than early to a sold out screening. I mention it because it’s a clean example of how offering less can provide more value.
The theater should, if they don’t want to do assigned seating, rip out the first two rows.
At first this seems crazy. Many people prefer sitting in the first two rows to being unable to attend the show, so the seats create value while increasing profits. What’s the harm?
The harm is introducing risk, and creating an expensive auction.
The risk is that if you go to the movies, especially the movies you most want to see, you’ll be stuck in the first two rows. So when you buy a ticket and go upstairs, you might get a bad experience. If the show is sold out, that might be better, as you can buy a different ticket or none at all.
The auction is worse. Seats are first come, first serve. So if it’s important to get served first, you need to come first. If it’s very important to not be last, to avoid awful seats, you need to come early, and so does everyone else, bidding up the price of not-last the same way you’d bid up being first.
With no awful seats, those who care a lot about better seats will still come early, but most people care a lot less. So everyone can come substantially earlier, and not feel pressure. Many will show at the last minute, and be totally fine.
The deadweight loss in time, of adding those forty extra seats, is massive, distributed throughout the theater. Everyone feels pressure to get there early even when they already have a ticket, so even if their seat is good, they stressed out about their seat, and not only burned time but feel bad about being pressured.
Avoiding time-based auctions and signals, or at least minimizing the value at stake in them, is an important and underappreciated problem.