Segregation , Discrimination , and African - American Theater Entry during Jim Crow ∗

We examine the role of residential segregation and racial discrimination in determining the entry of movie theaters serving African-American customers in the 1950s. These theaters provided an alternative to the segregated theaters of the Jim Crow era. Consistent with preference externalities in racial and ethnic enclaves, we find that a greater degree of residential segregation leads to more African-American theater entry. Using estimates from a Bresnahan and Reiss model of theater entry, we find that this effect is due to higher variable profits in residentially segregated cities rather than lower fixed costs of entry. The effect of racial bias among whites is found to be complex. Using several measures of racial discrimination, we conclude that bias leading to a taste for segregation leads to greater entry, while more generally racial bias results in fewer theaters. ∗We appreciate the helpful comments of Bruno Cassiman and seminar and conference participants at ISNIE 2015, IESE Strategy and Entrepreneurship Winter Mini-Conference, Universitat Pompeu Fabra, Tilburg University, Universidad de Oviedo, Universidad Publica de Navarra, UC Santa Cruz, the University of Utah, and the Carey Business School at Johns Hopkins University. The usual disclaimer applies. †Associate Professor, Carey Business School, Johns Hopkins University. Email: [email protected]. ‡Associate Professor, Economics Department, University of California, Santa Cruz. Email: [email protected].