The Welfare Effects of Vertical Integration in China's Movie Industry
71 Pages Posted: 12 Mar 2022 Last revised: 10 Sep 2022
Date Written: September 8, 2022
This paper investigates the welfare effects of vertical integration in China's movie industry. We leverage data covering all theaters and 423 popular movies in China during 2014-2018. We find no evidence of integrated movies being foreclosed to rival theaters. Integrated theaters show their movies for longer, allocate more screenings, and charge lower prices. We estimate a model of consumers' demand and theaters' screening decisions. Integrated theaters internalize a substantial fraction of their upstream companies' profits. Vertical integration both mitigates distortions from revenue-sharing contracts and steers demand favoring integrated movies. Overall, vertical integration increases consumer surplus with considerable heterogeneity across markets.
Keywords: Vertical integration, movie industry, consumer welfare
JEL Classification: D43, L13, L22, L42, L82
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