In this article, we study the effect of differentiation on firms' optimal investments in advertising and product quality in the specific context of the motion picture industry. To guide our empirical analysis, we develop a stylized model uncovering that competition in advertising is the highest for intermediate levels of horizontal differentiation, while product quality increases monotonically in differentiation. We corroborate our theoretical predictions with a large dataset on the movie industry confirming both the inverted U-shaped relationship between advertising and differentiation, and the monotonically increasing relationship between product quality and differentiation.

中文翻译：

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电影行业的竞争和战略预算选择*

在本文中，我们研究了电影行业特定背景下差异化对企业广告和产品质量最优投资的影响。为了指导我们的实证分析，我们开发了一个程式化模型，发现广告竞争对于水平差异化的中间水平是最高的，而产品质量在差异化中单调增加。我们用电影行业的大型数据集证实了我们的理论预测，证实了广告与差异化之间的倒 U 形关系，以及产品质量与差异化之间的单调递增关系。