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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.

Suggested Citation

  • Darren Filson, 2003. "Dynamic Common Agency, Vertical Integration, and Investment: The Economics of Movie Distribution," Claremont Colleges Working Papers 2003-07, Claremont Colleges.
  • Handle: RePEc:clm:clmeco:2003-07
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    File URL: http://www.claremontmckenna.edu/rdschool/papers/2003-07.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

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

    JEL classification:

    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis

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