Searching for the Concentration-Price Effect in the German Movie Theater Industry

Abstract

Summary The empirical relationship between market concentration and prices has been well established for a long time and for numerous industries. Recently it was confirmed for the US movie theater industry. This paper investigates, whether such a price-concentration relationship can be found on local cinema markets in Germany as well, focusing on up-to-date mainstream movies. First, we develop a model of monopolistic pricing and estimate its parameters using data of monopoly markets from a new set of German micro data. Then we apply the estimated model to simulate monopoly prices on local markets with two or more operators and compare them to the prices actually observed in these markets. We find no significant difference in admission prices, which puts our study in contrast to the results found on local US markets. Searching for an explanation, we test whether movie theater operators even though being located in the same geographic area, are local monopolists, but find no hint of that, either.