Econs+Market+Structure+Project

Various barriers to entry to film exhibition may be erected, whether of a regulatory nature, thus constituting barriers to entry in the more traditional sense, or relating to the implementation of practices. Examples include: -- regulations, which exist in some countries, intended to protect distribution in the cinema from the development of television and video; such regulations may provide that new films released in the cinema may not be shown on television or marketed on video for a fixed clearance period; they may also provide for the following hierarchy in film distribution: cinema, video and finally television. Regulatory clearance periods may also vary according to the nationality and box office success of a film, thus creating further discrimination, as [|marketing] on video may increase the film producer’s return.9 Thus, many producers tend to demand longer clearance periods between [|marketing] on video and the broadcasting of their films on pay-per-view and premium television channels in order to increase video retailers’ returns and consequently their own; http://www.techrepublic.com/whitepapers/singapore-cinema-operator-first-to-personalize/349834 http://infopedia.nl.sg/articles/SIP_1794_2011-03-08.html -There are a small number of dominant firms. For example, Golden Village, Cathay etc.& they have quite a significant amount of market share.-Products can be homogeneous or differentiated.Like, they offer approximately the same kinds of movies. But maybe they differentiate themselves in terms of packages. Maybe, there is some sort of bundling of movie tickets with popcorn and drinks at a cheaper price. Or better sound systems in the theatre.- There’s mutual interdependence too. Because cinema tickets across Singapore are generally approximately the same.
 * __Cinema Industry in Singapore __**
 * Research **

@http://in.answers.yahoo.com/question/index?qid=20100825035241AA3N4fF @http://www.channelnewsasia.com/stories/singaporelocalnews/view/337364/1/.html [] __Feature__: The cinema industry is dominated by a few large firms which control a large proportion of the industry’s output. These firms include Golden village and Cathay. The total market shares of these 2 firms are more than 70 per cent which is significant. In this market, there are substantial barriers to entry due to high set up costs. There are high barriers to entry such as 3D film projectors and relationship with film distributors. A large capital is also necessary to start business as the equipment used to screen the movie such as screen, projectors are expensive. Besides, the fixed costs of rental, wages to large number of employees and utilities are also high. This also acts as a natural barrier to entry as it requires a large investment and it cannot be recouped for a considerable period of time. These firms provide services which are used by consumers and the services tend to be differentiated. A differentiated product is one whereby the differences in the product may be real or imaginary but the main thing is that consumers do not regard such products as identical. The firms engage in non-price competition like different types of seating although the films are all the same This could be achieved by differences in terms of product image and service levels. For instance, the cinema firms differentiate themselves in terms of packages provided such as bundling movie tickets with popcorn and drinks at a cheaper price or better sound systems in the theatre. There is mutual interdependence between these markets. In Singapore, the increase in ticket price of one firm would result in the rest of the firms not following suit. For instance, the “50 cents increase for movie tickets at Golden Village cinemas in 2008” led to “Other organizations like Cathay Cineplex and Eng Wah Organization have no plans to increase ticket prices”. This is because an increase in price would lead to a more than proportionate fall in quantity demanded for its product. The firm would suffer substantial decline in sales revenue if it raise prices. This is because customers would switch to the now relatively cheaper prices. __Behaviour:__ The firms determine output by deciding the number of times they would screen a particular movie in a day. The popularity of the film would also affect the demand for the film. For instance, the internationally popular film “Avatar” was screened for a considerable long period of time. Firms would not charge a very high price because profits will eventually be eroded by taxation. Singapore’s corporate tax rate is a flat 17%. Due to price rigidity, the market price would not change very drastically.
 * SINGAPORE: Starting on Thursday, there will be a 50 cents increase for movie tickets at Golden Village cinemas. Golden Village Multiplex has announced that it will revise its ticket prices at its nine outlets. The organisation said the price increase is a result of the current market situation and rising costs. However, Gold Class and Cinema Europa ticket prices, movie promotional packages and rates with banks, students and other promotional partners will remain unchanged. Other organisations like Cathay Cineplex and Eng Wah Organisation have no plans to increase ticket prices. ||
 * Analysis**:

__Performance __ The firms are dynamic efficient as they have they incentive to invest in R&D activities so as to earn more profits. With the recent increasing demand for 3D films, many cinemas would want to provide this service so as to reap profits and maintain their competitiveness such that they would not lose their market share and their consumers. Firms are also less X-inefficient because they have the incentive to keep costs low. Since total profit = TR – TC, assuming TR is constant, a lower TC would result in higher total profits.

-cassandra, huey shyuan, tzu chun, xiangyue

=**__COMMENTS: please include your names after you commented!__**= The '50-cent increase in movie tickets' example is a good illustration of mutual interdependence between these oligopolistic firms. However, I would like to point out the possible reason why Cathay has no plans to increase its pricing, is that Cathay had already raised its pricing about 1-2 months earlier before Golden Village raises its pricing.([])

This indicates that Golden Village's decision to increase pricing could be a reaction to Cathay's increase, and thus Cathay would unlikely further increase its pricing again due to Golden Village's pricing increase since Cathay's pricing is already higher than Golden Village's after both firms had increased their pricing. Cathay would not want to lose more consumers. -Vincent