The Welfare Effects of Vertical Integration in China's Movie Industry

Luming Chen, Lisa Xuejie Yi and Chuan Yu

American Economic Journal: Microeconomics, 2024, vol. 16, issue 2, 204-35

Abstract: This paper investigates the welfare effects of vertical integration in China's movie industry. We leverage data covering all theaters and 423 popular movies in China during 2014–2018. We find no evidence of integrated movies being foreclosed to rival theaters. Integrated theaters show movies for longer, allocate more screenings, and charge lower prices. We estimate a model of consumers' demand and theaters' screening decisions. Integrated theaters internalize a substantial fraction of their upstream companies' profits. Vertical integration mitigates distortions from revenue-sharing contracts and steers demand favoring integrated movies. Overall, vertical integration increases consumer surplus with considerable heterogeneity across markets.

JEL-codes: D12 D22 L22 L82 O14 P23 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1257/mic.20210320

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