Monopoly Provision of Tune-Ins

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. The TV station may air a fully informative tune-in during the first program. The cost of the tune-in is the forgone advertising revenue. The viewers may learn the later program through a tune-in, if any, if they watch the earlier program, or by directly sampling it for a few minutes. Under mild conditions, there exists a unique perfect Bayesian equilibrium in which some viewers watch the first program just to see if there is a tune-in or not, and the TV station airs a tune-in unless the two programs are too dissimilar. In the absence of a tune-in, no viewer within the first-period audience keeps watching TV. Full information disclosure never arises. The market outcome is suboptimal; a social planner would air a tune-in for a wider range of programs. 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.