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The Welfare Effects of Vertical Integration in China's Movie Industry

Author

Listed:
  • Luming Chen
  • Lisa Xuejie Yi
  • Chuan Yu

Abstract

This paper investigates the welfare effects of vertical integration in China's movie industry. We leverage data covering all theaters and 423 popular movies in China during 2014–2018. We find no evidence of integrated movies being foreclosed to rival theaters. Integrated theaters show movies for longer, allocate more screenings, and charge lower prices. We estimate a model of consumers' demand and theaters' screening decisions. Integrated theaters internalize a substantial fraction of their upstream companies' profits. Vertical integration mitigates distortions from revenue-sharing contracts and steers demand favoring integrated movies. Overall, vertical integration increases consumer surplus with considerable heterogeneity across markets.

Suggested Citation

  • Luming Chen & Lisa Xuejie Yi & Chuan Yu, 2024. "The Welfare Effects of Vertical Integration in China's Movie Industry," American Economic Journal: Microeconomics, American Economic Association, vol. 16(2), pages 204-235, May.
    • Handle: RePEc:aea:aejmic:v:16:y:2024:i:2:p:204-35
    DOI: 10.1257/mic.20210320
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    More about this item

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • P23 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Factor and Product Markets; Industry Studies; Population

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