Demand and Supply Dynamics for Sequentially Released Products in International Markets: The Case of Motion Pictures

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Operations, Information and Decisions Papers
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dynamic simultaneous equations modeling
international release strategies
entertainment marketing
motion picture distribution and exhibition
channel management
Econometrics
Marketing
Operations and Supply Chain Management
Other Business
Other Economics
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Elberse, Anita
Eliashberg, Jehoshua
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We develop an econometric model to study a setting in which a new product is launched first in its domestic market and only at a later stage in foreign markets, and where the product's performance (“demand”) and availability (“supply”) are highly interdependent over time within and across markets. Integrating literature on international diffusion, “success-breeds-success” trends, and the theatrical motion picture industry—the focus of the empirical analysis—we develop a dynamic simultanenous-equations model of the drivers and interrelationship of the behavior of consumers (“audiences”) and retailers (“exhibitors”). Our findings emphasize the importance of considering the endogeneity and simultaneity of audience and exhibitor behavior, and challenge conventional wisdom on the determinants of box office performance (which is predominantly based on modeling frameworks that fail to account for the interdependence of performance and availability). Specifically, we find that variables such as movie attributes and advertising expenditures, which are usually assumed to influence audiences directly, mostly influence revenuesindirectly, namely through their impact on exhibitors' screen allocations. In addition, consistent with the idea that the “buzz” for a movie is perishable, we find that the longer is the time lag between releases, the weaker is the relationship between domestic and foreign market performance—an effect mostly driven by foreign exhibitors' screen allocations.

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2003-01-01
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Marketing Science
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