Filson, Darren Fabre, Fernando Nava, Alfredo Rodriguez, Paola
Year of Publication:
Claremont Colleges Working Papers in Economics 2001-01
The current literature on sharing contracts emphasizes the importance of asymmetric information and typically assumes that one party is risk neutral while the other is risk averse. This paper describes a real-world contract that is widely used - the movie exhibition contract - and argues that asymmetric information is not the main feature of the environment that leads to sharing. The explanation that fits the facts better is simply that distributors and exhibitors are both risk averse. The analysis suggests that two-sided risk aversion is important in determining contracts.
principal agent licensing entertainment film rental