Uniform prices for differentiated goods

The case of the movie-theater industry

Barak Y Orbach, Liran Einav

Research output: Contribution to journalArticle

69 Citations (Scopus)

Abstract

Since the early 1970s, movie theaters in the United States have employed a pricing model of uniform prices for differentiated goods. At any given theater, one price is charged for all movies, seven days a week, 365 days a year. This pricing model is puzzling in light of the potential profitability of prices that vary with demand characteristics. Another unique aspect of the motion-picture industry is the legal regime that imposes certain constraints on vertical arrangements between distributors and retailers (exhibitors) and attempts to facilitate competitive bidding for films. We explore the justifications for uniform pricing in the industry and show their limitations. We conclude that exhibitors could increase profits by engaging in variable pricing and that they could do so more easily if the legal constraints on vertical arrangements are lifted.

Original languageEnglish (US)
Pages (from-to)129-153
Number of pages25
JournalInternational Review of Law and Economics
Volume27
Issue number2
DOIs
StatePublished - Jun 2007

Fingerprint

movies
theater
pricing
industry
profitability
profit
Uniform price
Movie theaters
Industry
demand
Distributor
Profit
Retailers
Movies
Competitive bidding
Uniform pricing
Profitability
Film industry
Pricing
Justification

Keywords

  • Antitrust
  • Motion pictures
  • Paramount decrees
  • Uniform prices
  • Vertical arrangements

ASJC Scopus subject areas

  • Economics and Econometrics
  • Finance
  • Law

Cite this

Uniform prices for differentiated goods : The case of the movie-theater industry. / Orbach, Barak Y; Einav, Liran.

In: International Review of Law and Economics, Vol. 27, No. 2, 06.2007, p. 129-153.

Research output: Contribution to journalArticle

@article{fb18332386fe44e78009918c71e8574a,
title = "Uniform prices for differentiated goods: The case of the movie-theater industry",
abstract = "Since the early 1970s, movie theaters in the United States have employed a pricing model of uniform prices for differentiated goods. At any given theater, one price is charged for all movies, seven days a week, 365 days a year. This pricing model is puzzling in light of the potential profitability of prices that vary with demand characteristics. Another unique aspect of the motion-picture industry is the legal regime that imposes certain constraints on vertical arrangements between distributors and retailers (exhibitors) and attempts to facilitate competitive bidding for films. We explore the justifications for uniform pricing in the industry and show their limitations. We conclude that exhibitors could increase profits by engaging in variable pricing and that they could do so more easily if the legal constraints on vertical arrangements are lifted.",
keywords = "Antitrust, Motion pictures, Paramount decrees, Uniform prices, Vertical arrangements",
author = "Orbach, {Barak Y} and Liran Einav",
year = "2007",
month = "6",
doi = "10.1016/j.irle.2007.06.002",
language = "English (US)",
volume = "27",
pages = "129--153",
journal = "International Review of Law and Economics",
issn = "0144-8188",
publisher = "Elsevier Inc.",
number = "2",

}

TY - JOUR

T1 - Uniform prices for differentiated goods

T2 - The case of the movie-theater industry

AU - Orbach, Barak Y

AU - Einav, Liran

PY - 2007/6

Y1 - 2007/6

N2 - Since the early 1970s, movie theaters in the United States have employed a pricing model of uniform prices for differentiated goods. At any given theater, one price is charged for all movies, seven days a week, 365 days a year. This pricing model is puzzling in light of the potential profitability of prices that vary with demand characteristics. Another unique aspect of the motion-picture industry is the legal regime that imposes certain constraints on vertical arrangements between distributors and retailers (exhibitors) and attempts to facilitate competitive bidding for films. We explore the justifications for uniform pricing in the industry and show their limitations. We conclude that exhibitors could increase profits by engaging in variable pricing and that they could do so more easily if the legal constraints on vertical arrangements are lifted.

AB - Since the early 1970s, movie theaters in the United States have employed a pricing model of uniform prices for differentiated goods. At any given theater, one price is charged for all movies, seven days a week, 365 days a year. This pricing model is puzzling in light of the potential profitability of prices that vary with demand characteristics. Another unique aspect of the motion-picture industry is the legal regime that imposes certain constraints on vertical arrangements between distributors and retailers (exhibitors) and attempts to facilitate competitive bidding for films. We explore the justifications for uniform pricing in the industry and show their limitations. We conclude that exhibitors could increase profits by engaging in variable pricing and that they could do so more easily if the legal constraints on vertical arrangements are lifted.

KW - Antitrust

KW - Motion pictures

KW - Paramount decrees

KW - Uniform prices

KW - Vertical arrangements

UR - http://www.scopus.com/inward/record.url?scp=34548008371&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=34548008371&partnerID=8YFLogxK

U2 - 10.1016/j.irle.2007.06.002

DO - 10.1016/j.irle.2007.06.002

M3 - Article

VL - 27

SP - 129

EP - 153

JO - International Review of Law and Economics

JF - International Review of Law and Economics

SN - 0144-8188

IS - 2

ER -