How Video Rental Patterns Change as Consumers Move Online

34 Pages Posted: 23 Jan 2012 Last revised: 20 Aug 2014

Alejandro Zentner

University of Texas at Dallas - Naveen Jindal School of Management

Michael D. Smith

Carnegie Mellon University - H. John Heinz III School of Public Policy and Management

Cuneyd Kaya

University of Texas at Dallas

Date Written: October 10, 2012

Abstract

How will consumption patterns change when consumers move from brick-and-mortar to Internet markets? If consumers purchase more niche products online than at brick-and- mortar stores, does this have something to do with the channel or is this solely due to selection effects: the types of consumers who decide to use the Internet channel or the types of products that consumers select to purchase online?

We address these questions using customer-level rental panel data obtained from a national video chain as it was closing many of its local stores. This allows us to observe how behavior changes when consumers are forced to move from brick-and-mortar to online consumption.

Our results suggest that when consumers move from brick-and-mortar to online channels they are significantly more likely to rent “niche” titles relative to “blockbusters.” This suggests that a significant amount of niche product consumption online is due to the nature of the channel, not just due to selection effects.

Keywords: Long Tail, movie rentals, natural experiment, empirical estimation

Suggested Citation

Zentner, Alejandro and Smith, Michael D. and Kaya, Cuneyd, How Video Rental Patterns Change as Consumers Move Online (October 10, 2012). Available at SSRN: https://ssrn.com/abstract=1989614 or http://dx.doi.org/10.2139/ssrn.1989614

Alejandro Zentner

University of Texas at Dallas - Naveen Jindal School of Management ( email )

P.O. Box 830688
Richardson, TX 75083-0688
United States

Michael D. Smith (Contact Author)

Carnegie Mellon University - H. John Heinz III School of Public Policy and Management ( email )

Pittsburgh, PA 15213-3890
United States

HOME PAGE: http://www.heinz.cmu.edu/~mds

Cuneyd Kaya

University of Texas at Dallas

2601 North Floyd Road
Richardson, TX 75083
United States

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