TV Channel Search and Commercial Breaks

This study investigates time lapses that interrupt product consumption. Preeminent examples are commercial breaks during television or radio programming. The authors suggest that breaks facilitate consumers’ search for alternatives. Specifically, when there is so much uncertainty that consumers are unclear about utility levels of different products, they engage in costly search to resolve the uncertainty. For TV programming, breaks lower the opportunity cost of search, allowing the consumer to sample alternative channels without further interrupting the viewing experience on the current channel. Using data from the Chinese TV market, the authors estimate a sequential search model to study consumer TV channel choice behavior. The data contain a quasi-natural experiment due to a Chinese government policy change on commercial breaks. The natural experiment creates exogenous variations in the data that enable the empirical identification of heterogeneous consumer preference and search cost. The data patterns support the idea that viewers search for alternatives during commercial breaks. Drawing on the estimates, the authors investigate how the timing of breaks affects TV channels’ viewership, offering insights about how to strategically adjust the timing of breaks.