Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

Monday, September 11, 2017

How Much Product Variety is Required? Evidence from the Movie Theater Market

In Kyung Kim (Department of Economics, Nazarbayev University) asks How Much Product Variety is Required? Evidence from the Movie Theater Market.

ABSTRACT: This paper empirically investigates the effect of the entry of new theaters on the number of movies playing in incumbent theaters and in the market as a whole, as well as its effect on consumer welfare via the change in product variety and availability. Estimation results suggest that whereas the entry of competitors to a market does not affect the number of movies playing in a theater, the total number of movies playing in the market increases after the entry of new theaters. These findings imply that a theater offers a movie lineup different from those of rivals in order to ease competition, which leads to an increase in market-wide movie variety. We also find robust evidence that the net effect of increased movie variety in the market after the entry of new theaters on consumer welfare is non-monotonic; it is positive only for the first few entrants to a monopoly market.

http://lawprofessors.typepad.com/antitrustprof_blog/2017/09/how-much-product-variety-is-required-evidence-from-the-movie-theater-market.html

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