Digitization and Flexibility: Evidence from the South Korean Movie Market
Published in Marketing Science, 2021
This paper studies how digitization affects the flexibility of firms’ product assortment and pricing decisions. We focus on the motion picture industry, where the transition from physical to digital distribution has significantly lowered the costs of distributing and exhibiting movies. We develop a model of a movie exhibitor’s weekly assortment and pricing problem and estimate it using data from South Korea, a market that experienced a rapid transition to digital projection. The results show that digitization has led to a substantial increase in the flexibility of exhibitors, allowing them to offer a wider variety of movies and to adjust their schedules more frequently in response to demand. We find that this increased flexibility has led to significant gains in both consumer welfare and theater profits.
Recommended citation: Yang, J., Anderson, E. T., & Gordon, B. R. (2021). "Digitization and Flexibility: Evidence from the South Korean Movie Market." Marketing Science. 40(5), 821-843.
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