Measuring Efficiency in the Movie Theater Industry: A Bootstrap Data Envelopment Analysis Approach

Abstract

ABSTRACT This paper aims to propose a method to measure the operational efficiency of the movie theater businesses. The method is based on a bootstrap data envelopment approach to test the statistical significance of the performance difference between companies in the movie theater industry. The proposed method is utilized to investigate the operational efficiency of the three major U.S. movie theater chains. This article utilizes data from each company’s individual financial filings to estimate their bias-corrected efficiency scores. An aggregate report of the efficiency scores shows that the movie theater industry is experiencing a significant decline in both scale and technical efficiencies. The efficiency assessment of the three movie theater chains reports statistically significant differences. Based on the constant returns to scale assumption, the efficiency scores are different among the three movie theater chains. Closely, two significant differences are identified when considering the variable returns to scale assumption. The kernel density of the efficiency scores is estimated as well. Results suggest that the movie theater chains are in imperative need of developing an innovative strategic plan to tackle poor attendance and weak managerial practices. Other contributions and managerial issues are also discussed.