• *We thank seminar participants at the 2006 AEA Meetings in Boston, as well as the 2006 Conference on Economics of Information and Communication Technologies at ENST in Paris. Rob thanks the NSF, and Waldfogel thanks the Mack Center and the Wharton Electronic Business Initiative for research support. We are both grateful to Uri Spiegel for letting us administer surveys to his students, and to Liran Einav for useful comments. Sarah Waldfogel provided excellent assistance with data input. The usual disclaimer applies.


Using survey data on movie consumption by about 500 University of Pennsylvania undergraduate students, we ask whether unpaid consumption of movies displaces paid consumption. A variety of cross-sectional and longitudinal empirical approaches show large and statistically significant evidence of displacement. In the most appropriate empirical specification, we find that unpaid first consumption reduces paid consumption by about 1 unit. Unpaid second consumption has a smaller effect, about 0.20 units. Our analysis indicates that unpaid consumption, which makes up 5.2 per cent of movie viewing in our sample, reduced paid consumption in our sample by 3.5 per cent.