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Estimating Structural Models of Equilibrium and Cognitive Hierarchy Thinking in the Field: The Case of Withheld Movie Critic Reviews

Brown, Alexander L. and Camerer, Colin F. and Lovallo, Dan (2013) Estimating Structural Models of Equilibrium and Cognitive Hierarchy Thinking in the Field: The Case of Withheld Movie Critic Reviews. Management Science, 59 (3). pp. 733-747. ISSN 0025-1909. doi:10.1287/mnsc.1120.1563.

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Film studios occasionally withhold movies from critics before their release. Because the unreviewed movies tend to be below average in quality, this practice provides a useful setting in which to test models of limited strategic thinking: Do moviegoers seem to realize that no review is a sign of low quality? A companion paper showed that in a set of all widely released movies in 2000–2009, cold opening produces a significant 20%–30% increase in domestic box office revenue, which is consistent with moviegoers overestimating quality of unreviewed movies (perhaps due to limited strategic thinking). This paper reviews those findings and provides two models to analyze this data: an equilibrium model and a behavioral cognitive hierarchy model that allows for differing levels of strategic thinking between moviegoers and movie studios. The behavioral model fits the data better, because moviegoer parameters are relatively close to those observed in experimental subjects. These results suggests that limited strategic thinking rather than equilibrium reasoning may be a better explanation for naïve moviegoer behavior.

Item Type:Article
Related URLs:
URLURL TypeDescription Paper
Brown, Alexander L.0000-0002-5582-5304
Camerer, Colin F.0000-0003-4049-1871
Additional Information:© 2013 INFORMS. Received July 26, 2010; accepted March 6, 2012, by Brad Barber, behavioral economics. Published online in Articles in Advance September 4, 2012. The authors thank audiences at California Institute of Technology, the University of Chicago Booth School of Business, the University of California at Berkeley, Yale Graduate Student Conference on Behavioral Science, the 2007 North American Economic Science Association meeting, the 2007 Society for Judgment and Decision Making meeting, the 2007 Southern Economic Association meeting, the 2010 American Economic Association meeting, and the 8th Triennial Invitational Miami Choice Symposium, especially Stefano Della Vigna, David Grether, Stuart McDonald, Tom Palfrey, Charles Plott, Robert Sherman, and Leeat Yariv. The authors thank Esther Hwang, Carmina Clarke, Ferdinand Dubin, Zachary Bethune, Cheng Cheng, Xinrong Li, and Jonathan Garrity for help with data collection. The authors also thank Matt Shum and the Bush School Empirical Workshop, especially Stephanie Houghton, Steve Puller, and Lori Taylor, for help during revision. This paper has benefitted from the very helpful comments of the department editor and three referees.
Subject Keywords:decision analysis; game theory; economics; econometrics; marketing; competitive strategy; bounded rationality; psychology
Issue or Number:3
Record Number:CaltechAUTHORS:20130405-093345250
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Official Citation: Alexander L. Brown, Colin F. Camerer, and Dan Lovallo Estimating Structural Models of Equilibrium and Cognitive Hierarchy Thinking in the Field: The Case of Withheld Movie Critic Reviews Management Science March 2013 59:733-747; published online before print September 4, 2012, doi:10.1287/mnsc.1120.1563
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:37779
Deposited By: Tony Diaz
Deposited On:10 Apr 2013 17:33
Last Modified:09 Nov 2021 23:31

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