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Deterministic Adoption in Movie Industry

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  • Chng, Kean Siang
  • Lean, Hooi Hooi

Abstract

In this paper, we investigate the decision making process by movie goers. Under incomplete information environment, movie goers will have to learn the quality of the movie from the information relayed by predecessors. The hypothesis is formed by the movie goers when the movie is first released, and it is then compared to information received. In this environment, movie goers will constantly upgrade the belief system, or discard the weaker ones if found to be not consistent with the overall quality information received. Thus, positive news relayed in the initial stage will be magnified to greater importance; the movie becomes a hit. We model this deterministic adoption with first order difference equation. We find that the Hit movies exhibit higher deterministic adoption behavior and the relationship between current and previous adoptions can last longer, than if the movie is a flop. The time path or orbit of the dynamic growth also exhibits non-oscillatory behavior and converge to equilibrium level quickly; when the deterministic adoption mechanism loses its strength, the subsequent adoptions will eventually die off. In other words, the previous adoptions cannot determine the future adoptions. Although this behavior is present in both Hit and Non-hit movies, this diminishing mechanism is triggered in much earlier stage in Non-hit movies than it is in Hit movies.

Suggested Citation

  • Chng, Kean Siang & Lean, Hooi Hooi, 2007. "Deterministic Adoption in Movie Industry," MPRA Paper 8019, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:8019
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    References listed on IDEAS

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    1. Arthur, W Brian, 1994. "Inductive Reasoning and Bounded Rationality," American Economic Review, American Economic Association, vol. 84(2), pages 406-411, May.
    2. Glenn Ellison & Drew Fudenberg, 1995. "Word-of-Mouth Communication and Social Learning," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(1), pages 93-125.
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    More about this item

    Keywords

    deterministic adoption; learning; movie; consumption behavior;
    All these keywords.

    JEL classification:

    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles

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