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Learning via sequential market entry: Evidence from international releases of U.S. movies

Isaac R. Holloway

Journal of International Economics, 2017, vol. 104, issue C, 104-121

Abstract: Most U.S. movies are not distributed simultaneously to all of their foreign markets and many do not recoup the costs of market entry. In theory, sequential entry allows distributors to learn about their movies' quality from performance in successive markets. I find empirical evidence consistent with recent trade models of learning about export profitability: a one-standard-deviation increase in the update to expected box-office revenues from the previous round is associated with an increase in the probability of entry to a given market of approximately 20%. This effect is robust to controls for other potential determinants of entry, including extended gravity, seasonality of demand, academy award nominations, and competition from local and imported pictures.

Keywords: Heterogeneous quality; Sequential entry; Motion pictures; Cultural trade (search for similar items in EconPapers)
JEL-codes: F14 L82 (search for similar items in EconPapers)
Date: 2017
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Journal of International Economics is currently edited by Gourinchas, Pierre-Olivier and Rodríguez-Clare, Andrés

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Handle: RePEc:eee:inecon:v:104:y:2017:i:c:p:104-121