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Viewer Sampling And Quality Signaling In A Television Market

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Executive Summary

This paper analyzes a single television station's choice of airing tune-ins (preview advertisements). The author considers two consecutive programs located along a unit line. Potential viewers know the earlier program but are uncertain about the later one. They may learn it through a tune-in if they watch the earlier program and the television station chooses to air a tune-in, or by directly sampling it for a few minutes. If the sampling cost is sufficiently low, the unique Perfect Bayesian Equilibrium (PBE) exhibits no tune-ins. Otherwise, the unique PBE involves a tune-in unless the two programs are too dissimilar.

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