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Multi-product firms, heterogeneous quality and exporting behaviour: product-level evidence from the movie industry

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  • Yihong Tang
  • Jing Yan
  • Feng Yu

Abstract

This article examines how quality affects heterogeneous multiple-product firms’ exporting behaviours. We develop a structural model of the global movie market, including both consumers’ movie demand choices and firms’ exporting decisions. A movie studio is a multi-product firm that releases many movies within a year. We model movie quality as a combination of firm-level appeal and product-level attractiveness. We find that both studio-level and movie-level heterogeneity affect demand for movie, and movie-level heterogeneity is relatively more important. We also explore the counterfactual effects of quality improvement and trade liberalization on trade. Our results show that improvement of quality increases both intensive margin and extensive margin of trade. By elimination of quota, we find that trade liberalization increases movie exports to a foreign market by 19%. The results of our study can also help improve understanding of trade in the service industry. For instance, we do not find a positive correlation between the foreign entry costs and the geographic distance, as in the case of manufacture goods.

Suggested Citation

  • Yihong Tang & Jing Yan & Feng Yu, 2018. "Multi-product firms, heterogeneous quality and exporting behaviour: product-level evidence from the movie industry," Applied Economics, Taylor & Francis Journals, vol. 50(54), pages 5920-5934, November.
    • Handle: RePEc:taf:applec:v:50:y:2018:i:54:p:5920-5934
    DOI: 10.1080/00036846.2018.1489506
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    Cited by:

    1. Jordi McKenzie, 2023. "The economics of movies (revisited): A survey of recent literature," Journal of Economic Surveys, Wiley Blackwell, vol. 37(2), pages 480-525, April.
    2. Jing Yan & Feng Yu, 2021. "Can international coproduction promote the performance of cultural products in the global markets? Evidence from the Chinese movie industry," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 157(4), pages 777-798, November.

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