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How Block Booking Facilitated Self-Enforcing Film Contracts

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Author Info

  • Kenney, Roy W
  • Klein, Benjamin

Abstract

This paper uses the block-booking film exhibition contracts that were the subject of Paramount to examine the role of contract terms in facilitating self-enforcing relationships. Because of the large uncertainty in film value at the time of contracting, it is difficult to fully specify optimal exhibitor performance (such as exhibition run length) ex ante. Instead, the efficient contractual arrangement contractually overconstrains exhibitors and relies on the superior reputational capital of distributors to flexibly adjust contract terms ex post. The analysis illustrates that, rather than thinking of contracts as either court-enforced or self-enforced, transactors generally combine court-enforced and self-enforced sanctions by using contract terms to economize on their limited reputational capital. Block booking is explained within this framework by its effects on reducing the variance in the value of the film package and, therefore, the demands placed on the distributors' reputational capital. Copyright 2000 by the University of Chicago.

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Bibliographic Info

Article provided by University of Chicago Press in its journal Journal of Law & Economics.

Volume (Year): 43 (2000)
Issue (Month): 2 (October)
Pages: 427-35

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Handle: RePEc:ucp:jlawec:v:43:y:2000:i:2:p:427-35

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Web page: http://www.journals.uchicago.edu/JLE/

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Cited by:
  1. Elisabetta Iossa & Giancarlo Spagnolo, 2009. "Contracts as Threats: on a Rationale For Rewarding A while Hoping For B," CEIS Research Paper 147, Tor Vergata University, CEIS, revised 30 Sep 2009.
  2. Doh-Shin Jeon & Domenico Menicucci, 2012. "Bundling and Competition for Slots," American Economic Review, American Economic Association, vol. 102(5), pages 1957-85, August.
  3. 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.
  4. 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.

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