Using Revenue Sharing to Implement Flexible Prices: Evidence from Movie Exhibition Contracts

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, wh...

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Bibliographic Details
Published in:The Journal of industrial economics 2012-06, Vol.60 (2), p.187-219
Main Authors: Gil, Ricard, Lafontaine, Francine
Format: Article
Language:English
Subjects:
Contracts
Distribution costs
Distribution of profits
Distributors
Economics
Exhibitions
Fees
Film editing
Flexible prices
Industrial economics
Industry
Motion picture industry
Motion pictures
Movies
Price elasticity
Price flexibility
Prices
Pricing
Publishing industry
Revenue
Revenue sharing
Risk sharing
Spain
Theater
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Summary: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.
ISSN:0022-1821
1467-6451
DOI:10.1111/j.1467-6451.2012.00483.x