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Uniform prices for differentiated goods: The case of the movie-theater industry

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  • Orbach, Barak Y.
  • Einav, Liran
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    Abstract

    Since the early 1970s, movie theaters in the United States have employed a pricing model of uniform prices for differentiated goods. At any given theater, one price is charged for all movies, seven days a week, 365 days a year. This pricing model is puzzling in light of the potential profitability of prices that vary with demand characteristics. Another unique aspect of the motion-picture industry is the legal regime that imposes certain constraints on vertical arrangements between distributors and retailers (exhibitors) and attempts to facilitate competitive bidding for films. We explore the justifications for uniform pricing in the industry and show their limitations. We conclude that exhibitors could increase profits by engaging in variable pricing and that they could do so more easily if the legal constraints on vertical arrangements are lifted.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0144818807000488
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    Bibliographic Info

    Article provided by Elsevier in its journal International Review of Law and Economics.

    Volume (Year): 27 (2007)
    Issue (Month): 2 ()
    Pages: 129-153

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    Handle: RePEc:eee:irlaec:v:27:y:2007:i:2:p:129-153

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    Web page: http://www.elsevier.com/locate/irle

    Related research

    Keywords: Antitrust; Motion pictures; Uniform prices; Paramount decrees; Vertical arrangements;

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    Cited by:
    1. Fernanda Gutierrez-Navratil & Victor Fernandez-Blanco & Luis Orea & Juan Prieto-Rodriguez, 2011. "How do your rivals' releasing dates affect your box office?," ACEI Working Paper Series AWP-04-2011, the Association for Cultural Economics International, revised Nov 2011.
    2. Darlene C. Chisolm & George Norman, 2011. "Spatial Competition and market Share: An Application to Motion Pictures," Discussion Papers Series, Department of Economics, Tufts University 0763, Department of Economics, Tufts University.
    3. Andrew Eckert & Douglas West, 2013. "Proliferation of Brewers’ Brands and Price Uniformity in Canadian Beer Markets," Review of Industrial Organization, Springer, vol. 42(1), pages 63-83, February.
    4. Gil, Ricard & Hartmann, Wesley R., 2008. "Why Does Popcorn Cost So Much at the Movies? An Empirical Analysis of Metering Price Discrimination," Research Papers 1983, Stanford University, Graduate School of Business.
    5. Mitsuru Sunada, 2010. "Vertical Integration in the Japanese Movie Industry," Journal of Industry, Competition and Trade, Springer, vol. 10(2), pages 135-150, June.
    6. Courty, Pascal, 2011. "Unpriced quality," Economics Letters, Elsevier, vol. 111(1), pages 13-15, April.
    7. Mitsuru Sunada, 2012. "Competition among movie theaters: an empirical investigation of the Toho–Subaru antitrust case," Journal of Cultural Economics, Springer, vol. 36(3), pages 179-206, August.
    8. Victor Fernandez-Blanco & Luis Orea & Juan Prieto-Rodriguez, 2013. "Endogeneity and measurement errors when estimating demand functions with average prices: an example from the movie market," Empirical Economics, Springer, vol. 44(3), pages 1477-1496, June.
    9. Fernandez-Blanco, Victor & Orea, Luis & Prieto-Rodriguez, Juan, 2009. "Analyzing consumers heterogeneity and self-reported tastes: An approach consistent with the consumer's decision making process," Journal of Economic Psychology, Elsevier, vol. 30(4), pages 622-633, August.
    10. Engelstätter, Benjamin & Ward, Michael R., 2013. "Strategic timing of entry: Evidence from video games," ZEW Discussion Papers 13-117, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    11. Chien-Ping Chen, 2009. "A Puzzle or a Choice: Uniform Pricing for Motion Pictures at the Box," Atlantic Economic Journal, International Atlantic Economic Society, vol. 37(1), pages 73-85, March.
    12. Moul, Charles C., 2008. "Retailer entry conditions and wholesaler conduct: The theatrical distribution of motion pictures," International Journal of Industrial Organization, Elsevier, vol. 26(4), pages 966-983, July.

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