Operations, Information and Decisions Papers

Document Type

Journal Article

Date of this Version

2003

Publication Source

Marketing Science

Volume

22

Issue

3

Start Page

329

Last Page

354

DOI

10.1287/mksc.22.3.329.17740

Abstract

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.

Keywords

dynamic simultaneous equations modeling, international release strategies, entertainment marketing, motion picture distribution and exhibition, channel management

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Date Posted: 27 November 2017

This document has been peer reviewed.