"Do the right thing": Theoretical view on the elimination of vertical restraints in Movie Industry

Details

Supervisors

Johnen, Johannes

Faculty

Faculté des sciences économiques, sociales, politiques et de communication

Degree label

Master [120] en sciences économiques, orientation économétrie, à finalité approfondie

Abstract

In 1948, Department of Justice (DOJ) banned studios from owning movie theaters due to the formed cartel in movie distribution and theater markets. The new rules led to more fair competition, but there were also negative consequences: the fact that both studios and cinemas added margin separately caused price increasing. This is what is called the double marginalization problem. However, after 72 years, the ban was canceled due to technological, economic and market changes. This decision can be seen as a new stage for the film industry. In this work, I want to be among firsts to find out if new opportunities for studios would benefit ordinary viewers and other participants of the market and whether it is worth changing their strategies. Theoretical models were created and results imply higher income for Integrated case, but lower prices for consumers with Profit-Sharing.