Jason Maupin

Document Type

Honors Project

First Advisor

Dr. James Eaton

Second Advisor

Manown Kisor, Jr.

Degree Award Date

Spring 2003


home video market, structure-conduct-performance framework, historic and current trends, basic economic principles, quantitative analysis, normative economic analysis


Economics | Economic Theory | Technology and Innovation


The purpose of this project is two-fold. The first purpose and the one most emphasized is to examine the specific attributes of the home video market in a structure-conduct-performance framework. To accomplish this task, one has to examine historic and current trends that have affected and will potentially affect the industry. The discussion of the home video market cannot take shape without an examination on the basic economic principles of sunk costs, marginal costs, elasticities of demand, price discrimination, potential competition, risk transferring and consumer preferences that run throughout motion picture entertainment including those facets of the business that do not deal directly with home video. The final part of this first purpose will be a quantitative analysis detailing how attributes of recently released home videos affect rental revenues. One reason for this regression model is to examine the relationship between theatrical revenues and rental revenues. Also, this analysis will examine the relationship between rental revenues and whether or not customers had the capability of purchasing the video. Hopefully, regression statistics will show definite trends that can be found throughout the home video market. The goal of the first part of the paper is to use positive economic analysis to give the reader an objective portrait of the home video market.

The second purpose of this project is to expand the analysis beyond the video industry and make comparisons and contrasts with other industries; in this part of the paper, normative economic analysis will be used to relay to the reader more subjective opinions about the economy as a whole. The home video industry is a complex and dynamic one that is constantly being influenced by technology and innovation, a feature that mirrors many other entertainment and information industries such as recorded music and books. The home video industry also gives a representation of many other businesses that deal with both a sell-through market and a rental/lease market like home computers, cars, and some durable goods. The fate of the home video market, especially the fate of rental firms and formats, has definite parallels with many other sectors of the economy. Many of these relationships are matters of conjecture requiring a more subjective analysis, and for this reason, this purpose will not be treated as intensely as the first part of the paper. Because of it great complexities and numerous applications, the home video industry is one that is worthy of examining in greater detail. Economist Barry Litman described the industry in this manner, "(the) motion picture entertainment industry will be one of the most fascinating and dynamic industries of the twenty-first century."