Date of Original Version

6-2011

Type

Working Paper

Abstract or Description

Recent papers have shown that, in contrast to “the Long Tail” theory, movie sales remain concentrated in a small number of hits. These papers have argued that concentrated sales can be explained, in part, by heterogeneity in quality and increasing returns from social effects. Our research analyzes an additional explanation: how incomplete information may skew sales patterns. We use the movie broadcast on pay-cable channels as an exogenous shock to the availability of information, and analyze how this shock changes the resulting sales distribution.

Our data show that the pay-cable broadcast shifts the distribution of DVD sales toward “Long Tail” movies, suggesting an information spillover from the broadcast. We further develop a learning-based model of DVD demand to precisely quantify the lost DVD sales due to incomplete information. Our study contributes to the academic literature on information provision and market outcomes, and the dynamics of long tail markets.

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