The Uses of Game Theory in Describing When Movies Are Released
In the linked article the authors introduce a paper that uses game theory to describe how movies are released at different points in the year depending on their budget. In the paper the authors claim that movies with a larger budget tend to be released closer to dates of peak demand for going to the movies. This is based on the idea that a movie can make the most money the closer it is released to this peak period, but only if other movies are spaced out enough so as not to compete with the original movie in the same time frame. The authors then find that marketing spending is higher for films released during periods of peak demand (relating to the first point, they do this to steal away some of this demand from competing films released around the same time), and thus the ‘cost’ of releasing films closer to the period of peak demand is greater. The combination of these two points led to the conclusion that films with a larger budget are consistently released closer to the period of peak demand for movies, generally in the middle of the Summer. This conclusion is described via game theoretical arguments and is backed by data analysis by the authors of the article.
This is a direct application of the game theory we have learned in this class. We could consider the problem as each player being the producers of a movie, where all of the players have to decide when to release their movie. The utility in this game is the profit gained from the movie. In this paper it was found that it is best for the players to make different decisions, for each movie to be released at spread out intervals throughout the year. It is also true that the producers of each film want to have their release date as close to the peak demand dates in the Summer as possible. The authors of this article do go into more detail than the tables we have made to describe such situations in saying that larger budget movies are able to put more pressure on the lower budget competition. This larger budgeting for marketing could also be considered as an example of finding market clearing prices, as done in class. In this case the goods being sold are the times when a movie can be released and the consumers are the movie producers. As expected the goods with a higher demand, e.g. the dates closer to peak demand, have a higher price, e.g. marketing costs, than the goods (dates) that are farther from peak demand and less desirable by movie producers. This particular application goes into more specific detail than those discussed in class, however the basis behind the problem and the decisions of the industry as a whole are accurately described by a game theoretical model as described in several examples in class.
Here is the link to the discussed article:
http://www.ipdigit.eu/2015/07/strategic-timing-of-movie-releases/