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Quality vs. variety: Trading larger screens for more shows in the era of digital cinema

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Notes

  1. Quoted from http://www.imax.com.au/visitor_info/.

  2. Henceforth, we use screen size and screen width interchangeably.

  3. This ignores costs associated with provision of higher quality and higher variety.

  4. One critique of this approach is that the predicted number of showings is the same for all movies within a chain-location, such that a fixed effect at the chain-location level would remove all variation in this instrument. In the presence of such a fixed effect, an interaction between the instrument and movie characteristics indexed by jt would remove such a concern and predict different numbers of showings across movies within a chain-location.

  5. We do not include the nesting parameter in the before estimation as without instrumenting for the nest, this parameter - which is highly correlated with the dependant variable - explains most of the variation in the data.

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Authors and Affiliations

  1. The University of Chicago, Booth School of Business, Chicago, IL, 60637, USA

    Anita Rao

  2. Stanford Graduate School of Business, 655 Knight Way, Stanford, CA, 94305, USA

    Wesley R. Hartmann

Authors
  1. Anita Rao
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  2. Wesley R. Hartmann
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Correspondence to Anita Rao.

Appendix A: first-stage regression

Appendix A: first-stage regression

Table 6 presents the first-stage regression results for the main variables of interest - price, ln(Shows), ln(Screen Width) and the nesting parameter - specific to Specification S3. The number of screens in a chain was the instrument for shows. The significant coefficients on screensXhhi indicates that screens and shows are correlated. The overall effect at the average demographic is positive indicating that a chain with more screens (and a higher hhi) has more shows. The instrument for screen size - hhi - is such that it takes on large values when a chain has more variation in screen sizes across its auditoria and also when there are more screens. The overall coefficient on hhi and hhi 2 at the average demographic is significantly negative, indicating that such chains are more likely to screen movies in auditoria with smaller screens. The instrument for the nesting parameter - 1/(No. competing movies) - takes on larger values when there are fewer competing movies playing in the market. A positive coefficient indicates that the inside-nest share of the movie is higher when there are fewer competing movies playing. The average price of other movies playing in a chain that week is positively correlated with the price of the focal movie.

Table 6 First stage estimates for specification S3
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Rao, A., Hartmann, W.R. Quality vs. variety: Trading larger screens for more shows in the era of digital cinema. Quant Mark Econ 13, 117–134 (2015). https://doi.org/10.1007/s11129-015-9156-z

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