Do movie studios inflate box office estimates that they report every Sunday? Is the pattern of this inflation consistent with the studios' strategic incentives? Analysing actual and estimated box office returns of major movie releases between 2003 and 2010, we find that movie studios substantially overestimate weekend box office performance and that this overestimation is highly unlikely to be due to chance. Our findings also suggest that box office inflation is strategic because (1) inflation is substantially higher in the first weekend of release when the incentives are greatest to generate positive word of mouth and (2) inflation for the top two films in a weekend increases with the degree of competition between the films.
