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The Welfare Effects of Vertical Integration in China's Movie Industry

  • Luming Chen
  • Lisa Xuejie Yi
  • Chuan Yu
American Economic Journal: Microeconomics
vol. 16, no. 2, May 2024
(pp. 204-35)
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Abstract

This paper investigates the welfare effects of vertical integration in China's movie industry. We leverage data covering all theaters and 423 popular movies in China during 2014–2018. We find no evidence of integrated movies being foreclosed to rival theaters. Integrated theaters show movies for longer, allocate more screenings, and charge lower prices. We estimate a model of consumers' demand and theaters' screening decisions. Integrated theaters internalize a substantial fraction of their upstream companies' profits. Vertical integration mitigates distortions from revenue-sharing contracts and steers demand favoring integrated movies. Overall, vertical integration increases consumer surplus with considerable heterogeneity across markets.

Citation

Chen, Luming, Lisa Xuejie Yi, and Chuan Yu. 2024. "The Welfare Effects of Vertical Integration in China's Movie Industry." American Economic Journal: Microeconomics, 16 (2): 204-35. DOI: 10.1257/mic.20210320

Additional Materials

JEL Classification

  • D12 Consumer Economics: Empirical Analysis
  • D22 Firm Behavior: Empirical Analysis
  • L22 Firm Organization and Market Structure
  • L82 Entertainment; Media
  • O14 Industrialization; Manufacturing and Service Industries; Choice of Technology
  • P23 Socialist Systems and Transitional Economies: Factor and Product Markets; Industry Studies; Population
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