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DYNAMIC COMMON AGENCY AND INVESTMENT: THE ECONOMICS OF MOVIE DISTRIBUTION
Author(s) -
Filson Darren
Publication year - 2005
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1093/ei/cbi054
Subject(s) - economics , vertical integration , microeconomics , investment (military) , agency (philosophy) , bargaining power , distribution (mathematics) , value (mathematics) , industrial organization , computer science , politics , mathematical analysis , philosophy , mathematics , epistemology , machine learning , political science , law
This article analyzes investment and other strategies in a stationary dynamic common agency model of movie distribution. Contract choices interact with other strategic choices. The model explains several facts; movie distributors avoid head‐to‐head new hit releases, hits have longer runs than flops, and distributors receive the lion's share of value generated by hits. The model yields testable implications about the effects of vertical integration on inventory turnover, release decisions, run lengths, and allocations, but the results depend on how integration affects relative bargaining power. Vertical integration is privately profitable and may improve social welfare even though it reduces industry profits. (JEL L14 , L22 , L82 , C61 )