Online movie rental service Netflix has introduced a new feature to allow customers to watch movies and television series on their personal computers. Netflix competes with video rental retailer Blockbuster, which added an online rental service to the in-store rental service.
a. How will online movie viewing influence the price elasticity of demand for in-store movie rentals?
b. Would the cross elasticity of demand for online movies and in-store movie rentals be negative or positive? Explain.
c. Would the cross elasticity of demand for online movies with respect to high-speed Internet service be negative or positive? Explain.