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Using Revenue Sharing to Implement Flexible Prices: Evidence from Movie Exhibition Contracts
Author(s) -
Gil Ricard,
Lafontaine Francine
Publication year - 2012
Publication title -
the journal of industrial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.93
H-Index - 77
eISSN - 1467-6451
pISSN - 0022-1821
DOI - 10.1111/j.1467-6451.2012.00483.x
Subject(s) - exhibition , argument (complex analysis) , moral hazard , exploit , revenue , revenue sharing , set (abstract data type) , microeconomics , simple (philosophy) , business , economics , advertising , computer science , art , visual arts , incentive , computer security , finance , epistemology , biochemistry , chemistry , philosophy , programming language
Movie exhibition contracts entail revenue‐sharing terms that go down with weeks since release. We develop a simple model to show how the form of these contracts can be explained by the distributors’ desire to set flexible prices. We then use detailed data on theater‐movie contracts in Spain, where we exploit the information available at the time of contracting for movies previously released in the U . S ., and other movie and theater characteristics, to show how the implications of our flexible pricing argument are supported in the data, and differentiate our explanation from prior, more standard risk‐sharing and moral‐hazard explanations.