Two radio stations compete for advertisers. They run ads during 10 minute slots that they can locate anywhere within a given hour of air time. They know that listeners don’t like ads and will switch to another station to avoid them. Will their commercial times be disjoint, overlapping or will they exactly coincide?
Whatever they do, the listeners will adjust their behavior. Disjoint advertising intervals would mean that listeners, regardless of which station they are currently tuned to, will switch as soon as the ads start and always be listening to music. So that’s not an equilibrium.
Suppose they overlap. Radio station B is trying to be clever by starting its ads just a minute later than A. Those listening to radio station A switch to B when the ads start to get an extra minute of music. But when the ads start on B, the listeners know that the music will begin sooner on radio station A. But since you don’t know exactly when the ads will end, and in the meantime you have ads on either station, the time to switch to A is now. That’s not an equilibrium either.
If the ad intervals exactly coincide then listeners learn there is no point in switching. And if listeners aren’t switching then the stations can do no better than to have their ad intervals coincide. So that’s the equilibrium.
This paper by Andrew Sweeting shows empirically that stations coordinate their advertising intervals and explores the motives.
My simple model omits NPR. What programming runs on public radio during the ad intervals on commercial radio? Do commercial radio stations change their behavior during NPR pledge drives?
Cheap Talk 
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September 26, 2011 at 1:50 am
Lones Smith
Great minds think alike, and I have made exactly this point for many years. However, I found clear exceptions to the rule. So imagine n stations. Assume all coordinate on ads at 20 and 50 minutes past the hour (seems typical). Now let one station deviate to say 15 and 45 minutes past the hour.
Assume the market consists of car drivers (switching cost =0) and clock radio people who cannot switch when they are bushing teeth, flossing, showering, etc. Then the one station gets all the switchers at 20 and 50 minutes past the hour, and does not lose the non switchers at 15 and 45 minutes past. For large enough n, this is a profitable deviation.
September 26, 2011 at 6:36 am
twicker
@Lones: I have also noticed the same phenomenon. I’d assume (from what I’ve noticed) that folks at work fall under the same category as the clock radio people – i.e., people who are too busy w/other actions that they don’t switch.
I suspect that the switching cost depends on the amount of attention that one can devote to the radio. Switching involves directing attention to the radio, and then acting on that attention; it can’t just be pure background. In the car, we might sing along to the radio (or, well, I might); i.e., we likely devote attention resource to it before commercials, and, thus, recognize when commercials start and that we might find something better somewhere else. At work (or in the morning when we are, as you say, brushing teeth/etc.), we’re focused on whatever we’re working on and, thus, don’t notice when a commercial comes on.
September 26, 2011 at 11:23 am
DF
This does not look robust if the music stations offers different types of music or if one music station has a reputation for good (bad) music.
September 26, 2011 at 12:01 pm
JOSE
If you introduce switching costs, then all radio stations have incentives to make shorter commercials. I might stay with the same radio station if there will only be one advertisement and there is some probability that I will find another station also with advertisement and have to switch again. Moreover, if all stations are using this policy, short advertisements, the chances that I have to switch again say in the next minute, also increases, so my incentives are even smaller
September 26, 2011 at 2:42 pm
Mike
One question is, if all the stations are playing ads, how many people does that push to turn off the radio and find a CD or whatever? This happens for me in the car, where sometimes I will tire of my CDs or not feel like plugging in my ipod, but a bunch of ads will push me away from radio entirely.
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December 2, 2019 at 8:48 am
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