Retailer entry conditions and wholesaler conduct: The theatrical distribution of motion pictures

I add to the empirical literature on vertical contracting and wholesaler conduct by using retailer entry conditions to infer unobserved choice variables and equilibrium responses to prices and advertising. After estimating the US demand for theatrical motion pictures from 1990-96, I apply these techniques to compare observed outcomes to predictions under various distributor conduct hypotheses. While several caveats apply, results indicate that the hypothesis of competition among distributors fails to describe advertising levels or aggregate payments of theaters to studios. The hypothesis of some collusion among distributors, however, matches the data fairly well. (c) 2007 Elsevier B.V. All rights reserved.