Demand stochastics, supply adaptation, and the distribution of film earnings

W. Walls

Applied Economics Letters, 2005, vol. 12, issue 10, 619-623

Abstract: A market is analysed in which demand is a stochastic process and supply is contingent on the expected level of demand - a model that provides a realistic depiction of the motion picture market where consumer demand is a process of discovery and information sharing, and the supply of theatre screens expands through contingent contracts to accommodate demand. This model predicts that motion picture earnings will deviate from a power law and instead be distributed according to an exponential of a power law due to finite-size effects in demand. Empirical analysis on a large sample of motion pictures finds significant deviation from the power law distribution and a remarkably good fit for the stretched exponential distribution.

Date: 2005
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DOI: 10.1080/13504850500166246

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