Competition and Retailer Product Choice: Evidence from the Movie Theater Market

In Kyung Kim
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In Kyung Kim: Department of Economics, Nazarbayev University

No 1704, Working Papers from Nazarbayev University, Department of Economics

Abstract: In this paper, we empirically study the effect of entry on an incumbent theater's decision on seat allocation across movies as well as movie variety. We find that when confronting a new competitor an independent theater always reallocates seats from a handful of the most popular movies to the less popular ones. A chain theater also does so in the case of entry of a rival chain's theater. When the new theater belongs to the same chain, it decreases the number of seats allocated to the most popular movies even more. In contrast, if the new theater is independently owned, a chain theater reallocates in the other direction. Given the observation that theaters' screening schedules overlap less in less popular movies, our findings suggest that whereas an independent theater always differentiates itself from a new competitor, a chain theater's response to entry depends on the ownership of the new competitor. Although the overall impact of entry on an incumbent theater's movie variety is not significant, movie differentiation by theaters leads to an increase in movie variety in the local market, promoting the positive agglomeration effect

Keywords: product differentiation; product variety; competition; multiproduct retailer; movie theater industry (search for similar items in EconPapers)
JEL-codes: L13 L22 L82 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2017-06, Revised 2018-03
New Economics Papers: this item is included in nep-com, nep-cul, nep-ind, nep-mkt and nep-tid
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