Spatial Competition and Market Share: An Application to Motion Pictures

This paper presents an empirical assessment of movie theatre attendance in two major metropolitan markets and provides strong support for the importance of spatial characteristics in determining attendance. We consider the hypothesis that attendance at a particular movie theatre reflects a tension between two effects: a negative competition effect and a positive agglomeration effect. We find evidence that the competition effect dominates. Further, we identify a pattern of systematic spatial decay in the impact of this effect on demand. JEL Classifications: L11, D43, L82 *Darlene C. Chisholm is Professor of Economics at Suffolk University: [email protected]; George Norman is William and Joyce Cummings Family Chair of Entrepreneurship and Business Economics at Tufts University: [email protected]. We are grateful to the DeSantis Center for Motion Picture Industry Studies of Florida Atlantic University College of Business and Economics for providing a grant to fund this research, to Synergy Retail for compiling the data set used in this paper, and to Vicky Huang for research assistance. For valuable suggestions and comments, we are grateful to: Bart Addis, In-Mee Baek, Thomas Downes, David Garman, Jonathan Haughton, Sanjiv Jaggia, Gilbert Metcalf, William Klemperer, Richard Startz, Jonathan Taylor, W. David Walls, Jeffrey Zabel, T. Nicholas Zervas, and seminar participants at Columbia University, Suffolk University, the NBER Productivity Lunch Series, the Summit Workshop on Motion-Pictures Industry Studies at the DeSantis Center, and the International Industrial Organization, Western Economic Association International, and American Economic Association Conferences. Remaining errors are, as usual, the sole responsibility of the authors. Please do not quote or cite without permission.