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At the Movies: The Economics of Exhibition Contracts

Author

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  • Darren Filson
  • David Switzer
  • Portia Besocke

Abstract

We describe a real-world profit sharing contract--the movie exhibition contract--and consider alternative explanations for its use. Two explanations based on difficulties with forecasting fit the facts better than asymmetric information models. The first emphasizes two-sided risk aversion; the second emphasizes measurement costs. Transaction costs and long-term relationships also affect contractual practices. We use an original data set of all exhibition contracts involving 13 theaters owned by a prominent St. Louis exhibitor over a two-year period to inform our theories and test hypotheses. The findings question traditional contract theory and may be relevant for other contracting environments.(JEL L14, L82, D45, D80) Copyright 2005, Oxford University Press.

Suggested Citation

  • Darren Filson & David Switzer & Portia Besocke, 2005. "At the Movies: The Economics of Exhibition Contracts," Economic Inquiry, Western Economic Association International, vol. 43(2), pages 354-369, April.
    • Handle: RePEc:oup:ecinqu:v:43:y:2005:i:2:p:354-369
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    More about this item

    JEL classification:

    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media
    • D45 - Microeconomics - - Market Structure, Pricing, and Design - - - Rationing; Licensing
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General

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