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Pricing of First-Run Movies in Small U.S. Metropolitan Areas: Multimarket Contact and Chain Effects

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  • Feinberg Robert M.

    (American University, 4400 Massachusetts Ave. N.W., Washington, DC 20016, USA)

Abstract

In recent years, the role of multimarket contact (MMC) among firms in influencing market performance has been studied for a relatively small group of industries – with banking and airlines most often examined, though the cement and telecommunications industries have been studied as well. This paper investigates this issue for the local movie theater industry in the U.S., one not previously studied in this regard. In small U.S. metropolitan areas, there is considerable variation in the nature of MMC among theater chains (large and small), which allows us to examine whether MMC among firms has an impact on movie pricing in these smaller markets. Data on movie pricing, market structure, and income and population characteristics are obtained for 118 multi-screen first-run movie theaters in 79 small metropolitan areas – those with under 250,000 people – which are not part of larger “consolidated” metropolitan areas. Analysis provides evidence supportive of MMC effects but suggestive of its limited applicability.

Suggested Citation

  • Feinberg Robert M., 2015. "Pricing of First-Run Movies in Small U.S. Metropolitan Areas: Multimarket Contact and Chain Effects," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 15(1), pages 285-297, January.
    • Handle: RePEc:bpj:bejeap:v:15:y:2015:i:1:p:13:n:14
    DOI: 10.1515/bejeap-2014-0070
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    References listed on IDEAS

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    1. Ciliberto, Federico & Williams, Jonathan, 2010. "Does Multimarket Contact Facilitate Tacit Collusion? Inference on Conjectural Parameters in the Airline Industry," MPRA Paper 24888, University Library of Munich, Germany.
    2. 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.
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    Cited by:

    1. Haizhen Lin & Ian M. McCarthy, 2023. "Multimarket Contact in Health Insurance: Evidence from Medicare Advantage," Journal of Industrial Economics, Wiley Blackwell, vol. 71(1), pages 212-255, March.

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    More about this item

    Keywords

    multi-market contact; price determination; movie theaters;
    All these keywords.

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media

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