The Lead-Lag Puzzle of Demand and Distribution: A Graphical Method Applied to Movies

Marketing Science, 24 (4): 635-645, 2005

24 Pages Posted: 6 Sep 2015

See all articles by Bob E. Krider

Bob E. Krider

Hong Kong University of Science & Technology (HKUST) - Department of Marketing

Tieshan Li

Concordia University, Quebec

Yong Liu

University of Arizona

Charles Weinberg

University of British Columbia (UBC)

Date Written: 2005

Abstract

Understanding the lead-lag relationship between distribution and demand is an important and challenging issue for all marketers. It is particularly challenging in the movie industry, where the very short lifespan and decaying revenue and exhibition patterns of motion pictures means that the associated time series are short and nonstationary, rendering existing econometric methods unreliable. We propose an alternate method that uses state-space diagrams to determine lead-lag relationships. Straightforward to apply and interpret, it takes advantage of the eye’s ability to see patterns that algebra-based formulations cannot easily recognize. A number of validation tests are provided to illustrate the usefulness and limitations of the method. We study the weekly data for 231 major movies released in 2000-2001. While econometric methods do not provide consistent results, the graphical method of visually inferred causality clearly shows a pattern that demand leads distribution for most movies. In other words, the dominant industry pattern is one of movie exhibitors monitoring box office sales and then responding with screen allocation decisions. The managerial implications of these findings are discussed.

Keywords: distribution, marketing tools, movies, state-space diagrams, time series

Suggested Citation

Krider, Bob E. and Li, Tieshan and Liu, Yong and Weinberg, Charles, The Lead-Lag Puzzle of Demand and Distribution: A Graphical Method Applied to Movies (2005). Marketing Science, 24 (4): 635-645, 2005, Available at SSRN: https://ssrn.com/abstract=2656381

Bob E. Krider

Hong Kong University of Science & Technology (HKUST) - Department of Marketing

Department of Marketing
Clear Water Bay, Kowloon
Hong Kong

Tieshan Li

Concordia University, Quebec ( email )

1455 de Maisonneuve Blvd. W.
Montreal, Quebec H3G 1MB
Canada

Yong Liu (Contact Author)

University of Arizona ( email )

1130 E Helen Street
Tucson, AZ 85721
United States

HOME PAGE: http://https://eller.arizona.edu/people/yong-liu

Charles Weinberg

University of British Columbia (UBC) ( email )

2329 West Mall
Vancouver, British Columbia BC V6T 1Z4
Canada

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