Abstract

http://ssrn.com/abstract=2215111
 


 



Impact of Competition on Product Quality Provision: Case of the Motion Picture Exhibitors


A. Yesim Orhun


The Stephen M. Ross School of Business at the University of Michigan

Pradeep K. Chintagunta


University of Chicago

Sriraman Venkataraman


University of North Carolina (UNC) at Chapel Hill - Marketing Area

January 24, 2013

Ross School of Business Paper

Abstract:     
We study product quality choice as a competitive tool to answer two related questions. What is the impact of competition on the quality provision of firms? How does the ability to adjust quality impact business stealing? We present empirical evidence of quality responses to market structure changes in the movie exhibition industry. We show that competitive incentives, all else constant, exert an upward pressure on quality. The incumbent's quality response to entry is negative if the entrant is owned by the same chain, but either less negative or positive if the entrant belongs to a rival chain. Additionally, incumbents have weaker incentives to increase quality in response to entry if they possess an advantage in a different quality dimension. We also show that not accounting for endogenous product choices confounds business stealing measurement and suggests cannibalization to exceed business stealing (echoing previous literature), a conclusion that is reversed when we control for changes in endogenous product choices.

Number of Pages in PDF File: 37

Keywords: Product Competition, Quality, Cannibalization, Business Stealing

JEL Classification: L10, L40

working papers series


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Date posted: February 12, 2013 ; Last revised: February 25, 2013

Suggested Citation

Orhun, A. Yesim and Chintagunta, Pradeep K. and Venkataraman, Sriraman, Impact of Competition on Product Quality Provision: Case of the Motion Picture Exhibitors (January 24, 2013). Ross School of Business Paper. Available at SSRN: http://ssrn.com/abstract=2215111 or http://dx.doi.org/10.2139/ssrn.2215111

Contact Information

A. Yesim Orhun (Contact Author)
The Stephen M. Ross School of Business at the University of Michigan ( email )
701 Tappan Street
Ann Arbor, MI MI 48109
United States
Pradeep K. Chintagunta
University of Chicago ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-8015 (Phone)
773-702-0458 (Fax)
Sriraman Venkataraman
University of North Carolina (UNC) at Chapel Hill - Marketing Area ( email )
Chapel Hill, NC 27599
United States

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