When to Sell Your Idea: Theory and Evidence from the Movie Industry

Abstract:     
How completely should an innovator develop his idea before selling it? In the context of selling original movie ideas, I present a model that features the writer’s private information on the idea’s value, different protection levels associated with different development stages, as well as costly buyer participation. The empirical results are consistent with the model’s predictions: Inexperienced writers are excluded from the market for earlier-stage ideas, restricting their choices to developing the idea fully or abandoning it; writers who have a choice sell better ideas at a later stage and worse ideas at an earlier stage; and lastly, intermediaries facilitate earlier-stage sales for inexperienced writers.

Number of Pages in PDF File: 36

working papers series