Quality, advertisement and social influences in cultural market : the case of motion picture

Abstract

In the motion picture industry the winner takes it all. Every year a few blockbuster movies such as Avatar, Pirates of the Caribbean, and Toy Story gather most of the Box Office sales while many other movies obtain very low sales. Why do movie goers cluster so much on the same movies? In this paper we propose an agent-based model in which the movie goer's decision-making depends on external influence such as advertisement, internal influence such as imitation, shared consumption influence such as the desire of visiting a movie with someone else and movies' quality. We study how the movie goer's decision-making determines Box Office sales. We find that the average importance consumers attach to movies' quality is low, much lower than the importance consumers attach to external, internal and shared consumption influences. Moreover, we find that the dispersion of Box Office sales is mainly determined by the internal and external forces of the market. Finally we find that additional investments in ad expenditure budgets are particularly beneficial for high budget movies of high quality whereas low budget movies and movies of poor quality do not substantially benefit from additional advertising.