How Block Booking Facilitated Self-Enforcing Film Contracts

10 Pages Posted: 9 Jul 2011

See all articles by Roy W. Kenney

Roy W. Kenney

affiliation not provided to SSRN

Benjamin Klein

University of California, Los Angeles (UCLA) - Department of Economics; Compass Lexecon

Date Written: 2000

Abstract

This paper uses the block‐booking film exhibition contracts that were the subject of Paramount to examine the role of contract terms in facilitating self‐enforcing relationships. Because of the large uncertainty in film value at the time of contracting, it is difficult to fully specify optimal exhibitor performance (such as exhibition run length) ex ante. Instead, the efficient contractual arrangement contractually overconstrains exhibitors and relies on the superior reputational capital of distributors to flexibly adjust contract terms ex post. The analysis illustrates that, rather than thinking of contracts as either court enforced or self‐enforced, transactors generally combine court‐enforced and self‐enforced sanctions by using contract terms to economize on their limited reputational capital. Block booking is explained within this framework by its effects on reducing the variance in the value of the film package and, therefore, the demands placed on the distributors' reputational capital.

JEL Classification: L14, K12

Suggested Citation

Kenney, Roy W. and Klein, Benjamin, How Block Booking Facilitated Self-Enforcing Film Contracts (2000). Journal of Law and Economics, Vol. 43, No. 2, p. 427, October 2000. Available at SSRN: https://ssrn.com/abstract=1658204

Roy W. Kenney

affiliation not provided to SSRN ( email )

Benjamin Klein (Contact Author)

University of California, Los Angeles (UCLA) - Department of Economics ( email )

1999 Avenue of the Stars
Suite 1150
Los Angeles, CA 90067-4628
United States
310-728-2025 (Phone)
310-728-2070 (Fax)

HOME PAGE: http://www.econ.ucla.edu/people/Faculty/Klein.html

Compass Lexecon ( email )

1999 Avenue of the Stars
Suite 1150
Los Angeles, CA 90067-4628
United States
310-728-2025 (Phone)
310-728-2070 (Fax)

HOME PAGE: http://www.compasslexecon.com/professionals/bio?id=152

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