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At the Movies: The Economics of Exhibition Contracts

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Author Info

  • Darren Filson
  • David Switzer
  • Portia Besocke

Abstract

We describe a real-world profit sharing contract--the movie exhibition contract--and consider alternative explanations for its use. Two explanations based on difficulties with forecasting fit the facts better than asymmetric information models. The first emphasizes two-sided risk aversion; the second emphasizes measurement costs. Transaction costs and long-term relationships also affect contractual practices. We use an original data set of all exhibition contracts involving 13 theaters owned by a prominent St. Louis exhibitor over a two-year period to inform our theories and test hypotheses. The findings question traditional contract theory and may be relevant for other contracting environments.(JEL L14, L82, D45, D80) Copyright 2005, Oxford University Press.

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Bibliographic Info

Article provided by Western Economic Association International in its journal Economic Inquiry.

Volume (Year): 43 (2005)
Issue (Month): 2 (April)
Pages: 354-369

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Handle: RePEc:oup:ecinqu:v:43:y:2005:i:2:p:354-369

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Cited by:
  1. Xinlei Chen & Yuxin Chen & Charles Weinberg, 2013. "Learning about movies: the impact of movie release types on the nationwide box office," Journal of Cultural Economics, Springer, vol. 37(3), pages 359-386, August.
  2. David Lang & David Switzer & Brandon Swartz, 2011. "DVD sales and the R-rating puzzle," Journal of Cultural Economics, Springer, vol. 35(4), pages 267-286, November.
  3. Ohio University & Department of Economics & Hailey Hayeon Joo, 2009. "Social Learning and Optimal Advertising in the Motion Picture Industry," 2009 Meeting Papers 513, Society for Economic Dynamics.
  4. Ch'ng, Kean Siang, 2007. "Evolutionary Concept, Genetic Algorithm and Exhibition Contract in Movie Industry," MPRA Paper 5387, University Library of Munich, Germany, revised 19 Oct 2007.
  5. Enrico Böhme & Christopher Müller, 2011. "Searching for the Concentration-Price Effect in the German Movie Theater Industry," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 231(4), pages 479-493, August.
  6. Müller, Christopher & Böhme, Enrico, 2011. "A note on the relationship of mainstream and art house movie theaters," MPRA Paper 27908, University Library of Munich, Germany.
  7. James G. Mulligan & Daniel J. Wedzielewski, 2012. "Government Intervention to Prevent Bankruptcy: the Effect of Blind-Bidding Laws on Movie Theaters," Working Papers 12-03, University of Delaware, Department of Economics.
  8. Gordon H. Hanson & Chong Xiang, 2009. "International Trade in Motion Picture Services," NBER Chapters, in: International Trade in Services and Intangibles in the Era of Globalization, pages 203-222 National Bureau of Economic Research, Inc.
  9. David M. Switzer & David M. Lang, 2007. "Does Sex Sell? A Look at the Effects of Sex and Violence on Motion Picture Revenues," Working Papers 2008-5, Saint Cloud State University, Department of Economics, revised Mar 2008.
  10. 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.
  11. Jordi McKenzie, 2009. "Revealed word-of-mouth demand and adaptive supply: survival of motion pictures at the Australian box office," Journal of Cultural Economics, Springer, vol. 33(4), pages 279-299, November.
  12. Ricard Gil & Wesley Hartmann, 2007. "The Role and Determinants of Concession Sales in Movie Theaters: Evidence from the Spanish Exhibition Industry," Review of Industrial Organization, Springer, vol. 30(4), pages 325-347, June.
  13. Jordi McKenzie, 2012. "The Economics Of Movies: A Literature Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 26(1), pages 42-70, 02.

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