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Dynamic Common Agency, Vertical Integration, and Investment: The Economics of Movie Distribution

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  • Darren Filson

    (Claremont Graduate University)

Abstract

This paper analyzes the impact of vertical integration on investment and other strategies in a dynamic common agency framework. Movie distribution is used as a motivating example. The model matches several facts about movie distribution; distributors avoid head-to-head new hit releases, hits have longer runs than flops, and distributors receive the lion’s share of value generated by hits. Welfare comparisons show that integration is privately profitable and may improve social welfare even though it reduces industry profits. The e.ects of integration on strategies and welfare depend critically on how integration a.ects the bargaining power of the non-integrated firm.

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Bibliographic Info

Paper provided by Claremont Colleges in its series Claremont Colleges Working Papers with number 2003-07.

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Date of creation: Jan 2003
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Handle: RePEc:clm:clmeco:2003-07

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Keywords: common agency; exclusive dealing; entertainment; film; licensing;

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