Effects of Chain Affiliation in the Movie Theater Industry

In this paper, I empirically study the effect of chain affiliation on product variety and price in the movie theater industry. Using longitudinal data on Korean movie theaters, I find that movie variety in a theater increases by 3.2-5.5% after the theater joins a chain. Admission price, however, does not change after chain affiliation. These findings imply that consumers may benefit from the growing dominance of chain-affiliated theaters in recent decades. The results also suggest that the regulatory authorities should carefully examine the trade-off between the increase in market power and efficiency gains when evaluating the implications of chain affiliation.