This paper develops an econometric model to study a setting in which a new product is launched first in its domestic market and only at a later stage in foreign markets, and where the product's performance ("demand") and availability ("supply") are highly interdependent over time within and across markets. Integrating literature on international diffusion, "success-breeds-success" trends, and the theatrical motion picture industry - the focus of the empirical analysis - this paper develops a dynamic simultaneous-equations model of the drivers and interrelationship in the behavior of consumers ("audiences") and retailers ("exhibitors"). The findings emphasize the importance of considering the endogeneity and simultaneity of audience and exhibitor behavior, and challenge conventional wisdom on the determinants of box office performance (which is predominantly based on modeling frameworks that fail to account for the interdependence of performance and availability). Specifically, the study finds that variables such as movie attributes and advertising expenditures, which are usually assumed to influence audiences directly, mostly influence revenues indirectly, namely through their impact on exhibitors' screen allocations.
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