The Third-Degree Price Discrimination with Interdependent Demand : Evidence from Movie Theaters with Smart Phone Data}

I study the nature of the third-degree price discrimination by exploiting the removal of gender-based price discount by movie complex firms in Japanese exhibition market. In contrast to the extant literature which typically assumes that the price-discriminated markets are perfectly segmented, this study embraces the possibility of interdependent demands. Using theater-level visit data by gender, I found that the switch from female-only discount to all-gender discount did not only increase the movie demand for male but also brought more female visits to these firms, demonstrating that male and female demands for movies are interdependent. Furthermore, the price discount adjustment did not diminish the movie demands for the rival movie theaters, implying new market has been served as a result of the removal of gender-based discounts