At the movies: The economics of exhibition contracts

At the Movies: The Economics of Exhibition Contracts Abstract: We describe a real-world profit sharing contract- the movie exhibition contract-and consider alternative explanations for its use. Two explanations based on difficulties with forecasting fit the facts better than asymmetric information models. The first emphasizes two-sided risk aversion; the second emphasizes measurement costs. Transaction costs and long-term relationships also affect contractual practices. We use an original data set of all exhibition contracts involving thirteen theaters owned by a prominent St. Louis exhibitor over a two-year period to inform our theories and test hypotheses