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Uniform prices for differentiated goods: The case of the movie-theater industry

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  • Orbach, Barak Y.
  • Einav, Liran

Abstract

Since the early 1970s, movie theaters in the United States have employed a pricing model of uniform prices for differentiated goods. At any given theater, one price is charged for all movies, seven days a week, 365 days a year. This pricing model is puzzling in light of the potential profitability of prices that vary with demand characteristics. Another unique aspect of the motion-picture industry is the legal regime that imposes certain constraints on vertical arrangements between distributors and retailers (exhibitors) and attempts to facilitate competitive bidding for films. We explore the justifications for uniform pricing in the industry and show their limitations. We conclude that exhibitors could increase profits by engaging in variable pricing and that they could do so more easily if the legal constraints on vertical arrangements are lifted.

Suggested Citation

  • Orbach, Barak Y. & Einav, Liran, 2007. "Uniform prices for differentiated goods: The case of the movie-theater industry," International Review of Law and Economics, Elsevier, vol. 27(2), pages 129-153.
  • Handle: RePEc:eee:irlaec:v:27:y:2007:i:2:p:129-153
    DOI: 10.1016/j.irle.2007.06.002
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    References listed on IDEAS

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    Keywords

    Antitrust; Motion pictures; Uniform prices; Paramount decrees; Vertical arrangements;

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics
    • Z11 - Other Special Topics - - Cultural Economics - - - Economics of the Arts and Literature

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