Pricing of First-Run Movies in Small U.S. Metropolitan Areas: Multimarket Contact and Chain Effects

Abstract

In recent years, the role of multimarket contact (MMC) among firms in influencing market performance has been studied for a relatively small group of industries -with banking and airlines most often examined, though the cement and telecommunications industries have been studied as well. This paper investigates this issue for the local movie theater industry in the U.S., one not previously studied in this regard. In small U.S. metropolitan areas, there is considerable variation in the nature of MMC among theater chains (large and small), which allows us to examine whether MMC among firms has an impact on movie pricing in these smaller markets. Data on movie pricing, market structure, and income and population characteristics are obtained for 118 multi-screen first-run movie theaters in 79 small metropolitan areas -those with under 250,000 people -which are not part of larger "consolidated" metropolitan areas. Analysis provides evidence supportive of MMC effects but suggestive of its limited applicability.

Multimarket Contact in Health Insurance: Evidence from Medicare Advantage*

“…2 The presence of MMC and mutual forbearance has been examined empirically across several industries, including airlines (Evans & Kessides, 1994;Prince & Simon, 2009;Ciliberto & Williams, 2014), cement (Jans & Rosenbaum, 1997), banking (Molnar et al, 2013), movies (Feinberg, 2015), and radio (Waldfogel & Wulf, 2006), among others. More recently, Schmitt (2018) examines the role of MMC in hospital markets, and Wilson (2019) examines MMC in the internet service provider market.…”

“…Failing to meet this condition might cause researchers either to underestimate the effect of MMC or (incorrectly) fail to detect mutual forbearance. Our setting has a compelling advantage over existing studies in that price and quality 1 The presence of MMC and mutual forbearance has been examined empirically across several industries, including airlines (Evans and Kessides [1994]; Prince and Simon [2009]; Ciliberto and Williams [2014]), cement Jans and Rosenbaum [1997], banking Molnar et al [2013], movies Feinberg [2015], and radio Waldfogel and Wulf [2006], among others. More recently, Schmitt [2018] examines the role of MMC in hospital markets, and Wilson [2019] examines MMC in the internet service provider market.…”

Multimarket Contact in Health Insurance: Evidence from Medicare Advantage

“…Other works have identified additional mechanisms by which MMC could enhance collusion, such as concavity of the profit function(Spagnolo, 1999) and imperfect monitoring(Matsushima, 2001;Kobayashi & Ohta, 2012). 2 The presence of MMC and mutual forbearance has been examined empirically across several industries, including airlines(Evans & Kessides, 1994;Prince & Simon, 2009;Ciliberto & Williams, 2014), cement(Jans & Rosenbaum, 1997), banking(Molnar et al, 2013), movies(Feinberg, 2015), and radio(Waldfogel & Wulf, 2006), among others. More recently, Schmitt (2018) examines the role of MMC in hospital markets, andWilson (2019) examines MMC in the internet service provider market.3 This reflects nearly a four-fold increase since the Medicare Modernization Act of 2003.…”