To Review or Not to Review? Limited Strategic Thinking at the Movie Box Office
67 Pages Posted: 8 Oct 2008 Last revised: 21 Feb 2009
Date Written: February 9, 2009
Film distributors occasionally withhold movies from critics before their release. Cold openings provide a natural field setting to test models of limited strategic thinking. In a set of 856 widely released movies, cold opening produces a significant 15% increase in domestic box office revenue (though not in foreign markets and DVD sales), consistent with the hypothesis that some moviegoers do not infer low quality from cold opening. Structural parameter estimates indicate 1-2 steps of strategic thinking by moviegoers (comparable to experimental estimates). However, movie studios appear to think moviegoers are sophisticated since only 7% of movies are opened cold.
Keywords: behavioral game theory, limited strategic thinking, voluntary disclosure, experimental economics
JEL Classification: C72, D82, C90, L15
Suggested Citation: Suggested Citation