Competition in the Movie Theater Industry

Business / April 23, 2015 / No Comments /
This paper examines John Keynes’ theory of the nature of competition through the movie theater industry.

This paper observes the movie theaters marketplace for facts in the nature of competition and the idea of `perfect competition`, a concept rooted in the work of John Maynard Keynes. It examines the concept of equilibrium in the marketplace and traditional economic theory.
When we decide to go see our third viewing of The Mummy Returns we’re usually more concerned with what time the next show is than with what movie theaters with their 6-dollar tubs of popcorn can tell us about the nature of economic competition. However, the movie theater business is like all arenas of economic activity capable of telling us something about the structure of a particular market place, the history of that commodity or service and the nature of competition in that particular market place. Movie theaters can tell us something the nature of competition and indeed about the nature of the idea of perfect competition, a concept with roots in the work of John Maynard Keynes and his questions about the concept of equilibrium in the marketplace. Traditional economic theory assumed that a group of producers operated in a perfect market for any given commodity with each producing only a small part of the whole supply. Thus, for each producer (and for each commodity) the price was determined by the market. Each producer maximized its profits by selling only as much as would make marginal cost equal to price, in other words, each producer would produce exactly the amount that, if any more were to be produced that the additional product would add more to costs than it would to profits (MacHovec, 1995, p. 38). Each producer of any commodity (whether widgets or blockbusters) thus worked to capacity, to the point where profitability was limited by rising costs (MacHover, 1995, p. 42).

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