Government Intervention to Prevent Bankruptcy: the Effect of Blind-Bidding Laws on Movie Theaters
AbstractIn the 1970s motion picture studios increased their use of blind bidding and non-refundable guarantees in an attempt to reduce the risks associated with producing a small number of large budget films. However, theater owners claimed that blind bidding and guarantees shifted risk to them and increased the likelihood of bankruptcy, since they were required to bid for the right to exhibit a movie without seeing it first. In response to the lobbying of theater owners, twenty-four states passed laws between 1978 and 1984 that banned blind bidding, while seven states also banned non-refundable guarantees. This paper provides the first empirical analysis of the conflicting claims made by theater owners and movie studios about the impact of these laws on the survival rates of independent theaters, admission prices, and delays in the release of movies. We find that the laws were not only ineffective in keeping theater owners at risk of bankruptcy from exiting the market; they may have been even detrimental to those theater owners converting theaters to multiplexes at that time.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University of Delaware, Department of Economics in its series Working Papers with number 12-03.
Length: 54 pages
Date of creation: 2012
Date of revision:
Publication status: forthcoming in Economic Inquiry
Contact details of provider:
Postal: Purnell Hall, Newark, Delaware 19716
Phone: (302) 831-2551
Fax: (302) 831-6968
Web page: http://www.lerner.udel.edu/departments/economics/
More information through EDIRC
blind-bidding; motion picture industry; vertical restriction; state intervention;
Other versions of this item:
- James G. Mulligan & Daniel J. Wedzielewski, 2009. "Government Intervention to Prevent Bankruptcy: The Effect of Blind-Bidding Laws on Movie Theaters," Working Papers 09-07, University of Delaware, Department of Economics.
- K00 - Law and Economics - - General - - - General (including Data Sources and Description)
- K11 - Law and Economics - - Basic Areas of Law - - - Property Law
- K12 - Law and Economics - - Basic Areas of Law - - - Contract Law
- K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law
- K35 - Law and Economics - - Other Substantive Areas of Law - - - Personal Bankruptcy Law
- L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
- L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Mark Bergen & Daniel Levy & Sourav Ray & Paul H. Rubin & Benjamin Zeliger, 2004.
"When Little Things Mean a Lot: On the Inefficiency of Item Pricing Laws,"
2004-06, Department of Economics, Bar-Ilan University.
- Mark Bergen & Daniel Levy & Sourav Ray & Paul H. Rubin & Benjamin Zeliger, 2008. "When Little Things Mean a Lot: On the Inefficiency of Item-Pricing Laws," Journal of Law and Economics, University of Chicago Press, vol. 51(2), pages 209-250, 05.
- Mark Bergen & Daniel Levy & Sourav Ray & Paul Rubin & Benjamin Zeliger, 2004. "When Little Things Mean a Lot: On the Inefficiency of Item Pricing Laws," Law and Economics 0405005, EconWPA, revised 02 Jun 2005.
- Mark Bergen & Daniel Levy & Sourav Ray & Paul Rubin & Benjamin Zeliger, 2004. "When Little Things Mean a Lot: On the Inefficiency of Item Pricing Laws," Emory Economics 0404, Department of Economics, Emory University (Atlanta).
- Bergen, Mark & Levy, Daniel & Ray, Sourav & Rubin, Paul & Zeliger, Ben, 2006. "When Little Things Mean a Lot: On the Inefficiency of Item Pricing Laws," MPRA Paper 1158, University Library of Munich, Germany.
- Otto Toivanen & Michael Waterson, 2005.
"Market Structure and Entry: Where's the Beef?,"
RAND Journal of Economics,
The RAND Corporation, vol. 36(3), pages 680-699, Autumn.
- Toivanen, O. & Waterson, M., 2001. "Market Structure and Entry: Where's the Beef?," The Warwick Economics Research Paper Series (TWERPS) 593, University of Warwick, Department of Economics.
- Forsythe, Robert & Isaac, R. Mark & Palfrey, Thomas R., 1987.
"Theories and Tests of (Blind Bidding) in Sealed Bid Auctions,"
670, California Institute of Technology, Division of the Humanities and Social Sciences.
- Robert Forsythe & R. Mark Isaac & Thomas R. Palfrey, 1989. "Theories and Tests of "Blind Bidding" in Sealed-Bid Auctions," RAND Journal of Economics, The RAND Corporation, vol. 20(2), pages 214-238, Summer.
- F. Andrew, 2002. "Revenue-Sharing in Movie Exhibition and the Arrival of Sound," Economic Inquiry, Western Economic Association International, vol. 40(3), pages 380-402, July.
- Elzinga, Kenneth G & Hogarty, Thomas F, 1978. "Utah Pie and the Consequences of Robinson-Patman," Journal of Law and Economics, University of Chicago Press, vol. 21(2), pages 427-34, October.
- Ellickson, Paul, 2005. "Does Sutton Apply to Supermarkets?," Working Papers 05-05, Duke University, Department of Economics.
- Arthur De Vany & W. Walls, 1999. "Uncertainty in the Movie Industry: Does Star Power Reduce the Terror of the Box Office?," Journal of Cultural Economics, Springer, vol. 23(4), pages 285-318, November.
- Guimaraes, Paulo & Mata, José & Portugal, Pedro, 1995.
"The Survival of New Plants: Start-up Conditions and Post-entry Evolution,"
CEPR Discussion Papers
1203, C.E.P.R. Discussion Papers.
- Mata, Jose & Portugal, Pedro & Guimaraes, Paulo, 1995. "The survival of new plants: Start-up conditions and post-entry evolution," International Journal of Industrial Organization, Elsevier, vol. 13(4), pages 459-481, December.
- Daniel Levy & Mark Bergen & Shantanu Dutta & Robert Venable, 2005.
"The Magnitude of Menu Costs: Direct Evidence from Large U.S. Supermarket Chains,"
- Levy, Daniel, et al, 1997. "The Magnitude of Menu Costs: Direct Evidence from Large U.S. Supermarket Chains," The Quarterly Journal of Economics, MIT Press, vol. 112(3), pages 791-825, August.
- Chen, Ming-Yuan, 2002. "Survival duration of plants: Evidence from the US petroleum refining industry," International Journal of Industrial Organization, Elsevier, vol. 20(4), pages 517-555, April.
- Nilotpal Das & Evangelos M. Falaris & James G. Mulligan, 2009. "Vintage Effects and the Diffusion of Time-Saving Technological Innovations," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 9(1), pages 23.
- Dunne, Timothy & Klimek, Shawn D. & Roberts, Mark J., 2005. "Exit from regional manufacturing markets: The role of entrant experience," International Journal of Industrial Organization, Elsevier, vol. 23(5-6), pages 399-421, June.
- Darren Filson & David Switzer & Portia Besocke, 2005. "At the Movies: The Economics of Exhibition Contracts," Economic Inquiry, Western Economic Association International, vol. 43(2), pages 354-369, April.
- De Vany, Arthur & Walls, W David, 1996. "Bose-Einstein Dynamics and Adaptive Contracting in the Motion Picture Industry," Economic Journal, Royal Economic Society, vol. 106(439), pages 1493-1514, November.
- Davis, Peter, 2005. "The Effect of Local Competition on Admission Prices in the U.S. Motion Picture Exhibition Market," Journal of Law and Economics, University of Chicago Press, vol. 48(2), pages 677-708, October.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Saul Hoffman).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.