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Competition and Retailer Product Choice: Evidence from the Movie Theater Market

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  • In Kyung Kim

    (Department of Economics, Nazarbayev University)

Abstract

In this paper, we empirically study the effect of entry on an incumbent theater's decision on seat allocation across movies as well as movie variety. We find that when confronting a new competitor an independent theater always reallocates seats from a handful of the most popular movies to the less popular ones. A chain theater also does so in the case of entry of a rival chain's theater. When the new theater belongs to the same chain, it decreases the number of seats allocated to the most popular movies even more. In contrast, if the new theater is independently owned, a chain theater reallocates in the other direction. Given the observation that theaters' screening schedules overlap less in less popular movies, our findings suggest that whereas an independent theater always differentiates itself from a new competitor, a chain theater's response to entry depends on the ownership of the new competitor. Although the overall impact of entry on an incumbent theater's movie variety is not significant, movie differentiation by theaters leads to an increase in movie variety in the local market, promoting the positive agglomeration effect

Suggested Citation

  • In Kyung Kim, 2017. "Competition and Retailer Product Choice: Evidence from the Movie Theater Market," Working Papers 1704, Nazarbayev University, Department of Economics, revised Mar 2018.
    • Handle: RePEc:naz:wpaper:1704
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    References listed on IDEAS

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    More about this item

    Keywords

    product differentiation; product variety; competition; multiproduct retailer; movie theater industry;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • 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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