TAILIEUCHUNG - Uniform prices for differentiated goods: The case of the movie-theater industry

The level of basic services accessible to Mexican households has improved strongly in past decades. According to the 12th population census of 2000, water is available now in of all households (up from in 1990) and power reaches of all households (up from in 1990). For exporters of high quality consumer products, the penetration of more sophisticated products and/or services is more relevant: Tables 7 and 8 give an overview of recent data, including further refinements according to the socio-economic level and the region of residence respectively. Again, data is based on AC Nielsen’s survey of urban households. The data show marked differences between. | HARVARD LAW SCHOOL John M. Olin Center for Law Economics and Business Discussion Paper No. 337 NEW YORK UNIVERSITY SCHOOL OF LAW Law and Economics Research Paper Series Research Paper No. 04-02 THE UNIVERSITY OF ARIZONA JAMES E. ROGERS COLLEGE OF LAW Arizona Legal Research Paper Series Discussion Paper No. 06-07 Uniform Prices for Differentiated Goods The Case of the Movie-Theater Industry Barak Y. Orbach Liran Einav August 2007 This paper can be downloaded without charge from the Social Science Research. Network Paper Collection at http abstract 871584 IRL-5374 No. of Pages 25 ARTICLE IN PRESS ELSEVIER International Review of Law and Economics International Review of Law and Economics xxx 2007 xxx-xxx Uniform prices for differentiated goods The case of the movie-theater industry Barak Y. Orbacha Liran Einavb a University of Arizona Rogers College of Law United States b Department of Economics Stanford University and National Bureau of Economic Research United States Abstract Since the early 1970s movie theaters in the United States have employed a pricing model of uniform prices for differentiated goods. At any given theater one price is charged for all movies seven days a week 365 days a year. This pricing model is puzzling in light of the potential profitability of prices that vary with demand characteristics. Another unique aspect of the motion-picture industry is the legal regime that imposes certain constraints on vertical arrangements between distributors and retailers exhibitors and attempts to facilitate competitive bidding for films. We explore the justifications for uniform pricing in the industry and show their limitations. We conclude that exhibitors could increase profits by engaging in variable pricing and that they could do so more easily if the legal constraints on vertical arrangements are lifted. 2007 Published by Elsevier Inc. JEL classification D40 K21 L20 L82 M21 Z11 Keywords Antitrust Motion pictures Uniform prices Paramount decrees

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