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Viewer Sampling and Quality Signaling in a Television Market

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  • Levent Çelik

Abstract

This paper analyzes a single television station’s choice of airing tune-ins (preview advertisements). I consider 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. When the programs are also quality-differentiated, the willingness to air a tune-in, and thus to disclose location information, may be sufficient to signal high quality without any dissipative advertising.

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Bibliographic Info

Paper provided by The Center for Economic Research and Graduate Education - Economic Institute, Prague in its series CERGE-EI Working Papers with number wp363.

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Date of creation: Sep 2008
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Handle: RePEc:cer:papers:wp363

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Keywords: Information Disclosure; Tune-ins; Uncertainty; Sampling; Signaling.;

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  1. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
  2. Simon P. Anderson & Regis Renault, 1999. "Pricing, product diversity, and search costs: a Bertrand-Chamberlin-Diamond model," Virginia Economics Online Papers 335, University of Virginia, Department of Economics.
  3. Ron Shachar & Bharat N. Anand, 1998. "The Effectiveness and Targeting of Television Advertising," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 7(3), pages 363-396, 09.
  4. Bharat N. Anand & Ron Shachar, 2011. "Advertising, the matchmaker," RAND Journal of Economics, RAND Corporation, vol. 42(2), pages 205-245, 06.
  5. Nelson, Philip, 1974. "Advertising as Information," Journal of Political Economy, University of Chicago Press, vol. 82(4), pages 729-54, July/Aug..
  6. Meurer, Michael & Stahl, Dale II, 1994. "Informative advertising and product match," International Journal of Industrial Organization, Elsevier, vol. 12(1), pages 1-19, March.
  7. Kihlstrom, Richard E & Riordan, Michael H, 1984. "Advertising as a Signal," Journal of Political Economy, University of Chicago Press, vol. 92(3), pages 427-50, June.
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