Social learning and peer effects in consumption
Subtitle: evidence from movie sales
By: Enrico Moretti.
Contributors: National Bureau of Economic Research.
Series: NBER working paper series -- working paper 13832; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 13832.
Publisher: National Bureau of Economic Research
Published: 2008
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Description: "Using box-office data for all movies released between 1982 and 2000, I test the implications of a simple model of social learning in which the consumption decisions of individuals depend on information they receive from their peers.  The model predicts different box office sales dynamics depending on whether opening weekend demand is higher or lower than expected.  I use a unique feature of the movie industry to identify ex-ante demand expectations: the number of screens dedicated to a movie in its opening weekend reflects the sales expectations held by profit-maximizing theater owners.  Several pieces of evidence are consistent with social learning.  First, sales of movies with positive surprise and negative surprise in opening weekend demand diverge over time.  If a movie has better than expected appeal and therefore experiences larger than expected sales in week 1, consumers in week 2 update upward their expectations of quality, further increasing week 2 sales.  Second, this divergence is small for movies for which consumers have strong priors and large for movies for which consumers have weak priors.  Third, the effect of a surprise is stronger for audiences with large social networks.  Finally, consumers do not respond to surprises in first week sales that are orthogonal to movie quality, like weather shocks.  Overall, social learning appears to be an important determinant of sales in the movie industry, accounting for 38% of sales for the typical movie with positive surprise.  This implies the existence of a large "social multiplier'' such that the elasticity of aggregate demand to movie quality is larger than the elasticity of individual demand to movie quality"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 6/13/2008.

Includes bibliographical references.

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