Vertical Integration and Product Availability in the Movie Theater Industry

Research output: Working paper

Abstract

We examine the effects of integration between distribution and exhibition on product mix and availability in the movie theater industry. Our model predicts that integrated movie theaters distort their seat allocation in favor of own movies, but also have higher incentives to acquire demand information. Comparing the realized move demand with the actual seat allocation across theaters, we find that integrated theaters match demand better than independent ones turning away substantially fewer consumers and achieving higher consumer welfare. Our results suggest that better demand forecasting by integrated theaters improves their seat allocation sufficiently to offset the distortions due to foreclosure.
Original languageEnglish
Publication statusIn preparation - 2017

Fingerprint

Movie theaters
Industry
Product availability
Seat
Vertical integration
Integrated
Consumer welfare
Product mix
Foreclosure
Demand forecasting
Movies
Incentives

Keywords

  • vertical integration, foreclosure, product availability, movie theater industry

Cite this

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title = "Vertical Integration and Product Availability in the Movie Theater Industry",
abstract = "We examine the effects of integration between distribution and exhibition on product mix and availability in the movie theater industry. Our model predicts that integrated movie theaters distort their seat allocation in favor of own movies, but also have higher incentives to acquire demand information. Comparing the realized move demand with the actual seat allocation across theaters, we find that integrated theaters match demand better than independent ones turning away substantially fewer consumers and achieving higher consumer welfare. Our results suggest that better demand forecasting by integrated theaters improves their seat allocation sufficiently to offset the distortions due to foreclosure.",
keywords = "vertical integration, foreclosure, product availability, movie theater industry",
author = "Kim, {In Kyung} and Vladislav Nora",
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AB - We examine the effects of integration between distribution and exhibition on product mix and availability in the movie theater industry. Our model predicts that integrated movie theaters distort their seat allocation in favor of own movies, but also have higher incentives to acquire demand information. Comparing the realized move demand with the actual seat allocation across theaters, we find that integrated theaters match demand better than independent ones turning away substantially fewer consumers and achieving higher consumer welfare. Our results suggest that better demand forecasting by integrated theaters improves their seat allocation sufficiently to offset the distortions due to foreclosure.

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