RESEARCH NOTE

Why are Consumer Tastes and Expert JudgmentsDifferent? A Case Study of the Movie Industry

Hilary Lin

# International Atlantic Economic Society 2014

JEL M00

Audiences’ and critics’ reception to the arts are generally different. This trend is especiallyevident in commercial arts like movies, television dramas and musicals.What explains thedifference between consumers and critics’ evaluation? Cultural commentators suggest thatordinary consumers’ tastes differ from the criteria for excellence used by professionalcritics in providing expert judgments. In other words, critics’ aesthetic values are more“lofty” than those of the general public. This is known as the elite hypothesis. If the elitehypothesis is true, critics would have little influence on consumers’ tastes.

In this study, I attempt to test the elite hypothesis by using economic modeling ofconsumer taste formation and artist utility maximization. Art goods are experiencegoods. Consumers do not know the quality of the good before consumption. Inaddition, consumers’ tastes for the good grow as the good is consumed in greaterquantities. This is a form of rational addiction. I will use addiction theory to modelconsumer taste formation. Most artists are utility-maximizing producers. Artistsproduce art works that not only please the market and but also themselves. Fame andaesthetic satisfaction are the primary non-pecuniary benefits for artists. Artists wish togo down in history as notable creators. So artists prefer to pursue artistic styles that arefavored by the most prestigious critics. At the same time, artists seek monetary rewardsfor the artworks they produce. Artist utility depends on both the pecuniary andnon-pecuniary benefits. They maximize their utility rather than profit. My model findsthat the gap between the consumer’s and the artist’s perceived quality increases with anincrease in the consumer’s initial taste for the art and the rate of taste formation.

I then use data from the movie industry to test my model’s prediction. I collecteddata on movies released between 2008 and 2012. I used genre popularity as a proxy forconsumers’ initial taste endowment and film sequels as a negative proxy for the rate oftaste formation. Higher film sequels indicate a smaller rate of taste formation because

Int Adv Econ ResDOI 10.1007/s11294-014-9466-z

H. Lin (*)Economics Department, Iona College and Temple University, 715 North Ave, New Rochelle, NY 10801,USAe-mail: hilarylin2009@gmail.com

consumers have past exposure of a similar form and are less surprised, so their taste willbe formed at a slower rate.

Consumers’ and critics’ evaluation of films are measured by scores on InternetMovie Database websites. Other controlled variables include:

1. Total gross: this is the total domestic (US) gross box office receipts of the movieadjusted for inflation.

2. Total theaters: the total number of theaters that the film was shown at.3. Cast star power: a dummy variable for the top 50 stars. If any of the lead actors/

actresses of a movie are on the top 50 star list then the movie is considered to havesome star power, and this dummy variable takes the value of 1. Otherwise, its valueis 0. The list is ranked by the total gross revenue each actor/actress has raisedthroughout his/her career.

4. Director star power: a dummy for whether the director(s) of a movie has/have starpower. It has a value of 1 if it does, 0 if it does not. The list of directors is alsoranked by the total gross revenue each director has raised throughout his/her films.Directors with star power to those ranked in the first 15.

5. Distributor: a dummy variable for whether a film is distributed by a major filmdistributor. Major distributors are defined as the top 6 based on revenue from 2008to 2012.

6. Budget: the size of production budget; this is expressed in millions of US dollarsand adjusted for inflation.

7. MPAA rating: rating given by the Motion Picture Association of America. Theratings include G, PG, PG-13 and R.

The regression results show support for my model’s findings. Movies with morepopular genres have more divergent views between the consumers and critics. Filmswith a higher number of sequels have less divergent views between consumers andcritics. The findings in general support my theoretical model and the elite hypothesis.This implies that critics’ judgments will have little or no influence on consumers’ tastes.Although consumers and critics do not share the same aesthetic value, it is possible fora film to achieve both commercial and critical success. The film can incorporatedifferent aesthetic values that appeal to consumers and critics separately in order toachieve both commercial and critical success.

H. Lin