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Managerial Objectives, the R‐Rating Puzzle, and the Production of Violent Films

S. Abraham Ravid and Suman Basuroy
The Journal of Business
Vol. 77, No. S2 (April 2004), pp. S155-S192
DOI: 10.1086/381638
Stable URL:
Page Count: 38
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We analyze project choice in the motion picture industry and find evidence consistent with revenue maximization and excessive hedging. We find that movies that are very violent or feature sex and violence do not provide excess returns, but they increase revenues, particularly in the international market. Further, they tend to lose money less often and their returns are more predictable, even though there are never mega‐hits. This evidence is consistent with studies of other industries, and it partially explains the “R‐rating puzzle,” that is, the preponderance of R‐rated films although most studies find that G‐ and PG‐rated films perform better.

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