Research Details

Abstract

This paper investigates the implication of time lapses that interrupt product consumption on consumer welfare. The preeminent examples of such time lapses are commercial breaks during television or radio shows. In the case of TV commercial breaks, for example, conventional wisdom dictates that consumers prefer watching TV shows without the disruption of commercial breaks. However, we argue that breaks may improve the welfare of consumers under certain conditions. In particular, when there is so much uncertainty that the consumer is unclear about the exact utility levels of different products, she has to engage in a costly search to resolve the uncertainty before choosing a product. In the context of TV programming, breaks lower the opportunity cost of search, allowing the consumer to sample alternative channels without further interrupting the viewing experience on her current channel. Using data from the Chinese TV market, we estimate a sequential search model to evaluate our conjecture. The data contain a quasi natural experiment: the Chinese government banned all in-show commercial breaks for episode-based TV series on January 1, 2012. This new policy on commercial breaks created exogenous variations in the data that allow us to separately identify heterogeneous consumer preference and search cost. Based on the analyses, we have found evidence that the intended improvement in TV viewing experience was limited. Many consumers were worse off due to the ban on commercial breaks, because they could no longer sample alternative channels that were preferable to their current product choices. We also investigate how the timing of breaks affects TV channels' viewership, which offers managerial insights about how firms should strategically adjust the timing of breaks.

Type

Article

Author(s)

Song Yao, Yuxin Chen, Wenbo Wang

Date Published

2016

Citations

Yao, Song, Yuxin Chen, and Wenbo Wang. 2016. TV Channel Search and Commercial Breaks. Journal of Marketing Research.