Date of Award

May 2019

Document Type

Dissertation

Degree Name

Doctor of Philosophy (PhD)

Department

Economics

Committee Member

Andrew Hanssen

Committee Member

Thomas Hazlett

Committee Member

Matthew Lewis

Committee Member

Patrick Warren

Abstract

This dissertation encompasses three papers. My first paper assesses film makers' choices on product quality and variety in film production. Production budget and genre are used to represent quality and variety, respectively. My research is unique in that it exploits the peculiar lack of price variation in the film industry, as ticket prices are the same for each film. I construct a theoretical model of duopoly competition over genre and budget rather than the traditional focus on price. The model predicts that an increase in expected demand will result in an increase in the budgets of the films, as well as an increase in the difference in budget and genre between films. I empirically test these predictions using data on film release dates, budget, genre, and both expected and actual weekly number of tickets sold. The empirical findings confirm the predictions from the theory. If the expected demand of the release week increases by 1%, on average the budgets of the films that will release that week will increase by 0.66%, the difference in budget between the films will increase by 0.83%, and the genre similarity in percentage value will fall by 10.31 percentage points.

My second paper follows the idea of Corts (2001) on vertical market structure in the U.S. film market. In this paper, I examine the effect of vertical market structure and vertical integration on the competition of release dates of all wide release films in the U.S. in 2014 and 2015. I discover that applying the approach in Corts (2001) to recent data, the result is inconsistent. However, after bringing vertical integration into consideration I show that films with different upstream or downstream firms generally do not reach efficient outcomes in release date scheduling, which is consistent with the findings in Corts (2001).

My final paper examines the effect of expected release week demand on film studio's decision on film release and the number and variety of films released that week. It is expected that when demand is high, there would be more films released and more variety among them. However, in the U.S. film market, during high demand weeks, the number of films released is usually low comparing to other weeks. I find that if expected demand increases, the number of films released that week declines, along with the variety of the films. Evidence shows that when expected demand increases, there will be a film with extremely high production budget, and there will be fewer options in variety left for the other films since they need to differentiate themselves from the high budget film in terms of variety. Furthermore, two films similar in variety would be released far from each other in order to avoid direct competition. Therefore, in high demand weeks, the high budget film "crowds" other films out of the market, the number of films would decrease as well.

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