The Strategic Timing Incentives of Commercial Radio Stations: An Empirical Analysis Using Multiple Equilibria

Commercial radio stations and advertisers may have conflicting interests about when commercial breaks should be played. This article estimates an incomplete information timing game to examine stations’ equilibrium timing incentives. It shows how identification can be aided by the existence of multiple equilibria when appropriate data are available. It finds that stations want to play their commercials at the same time, suggesting that stations’ incentives are at least partially aligned with the interests of advertisers, although equilibrium coordination is far from perfect. Coordination incentives are much stronger during drivetime hours, when more listeners switch stations, and in smaller markets. ∗This article is a revised version of chapter 2 of my MIT Ph.D. thesis. I thank Glenn Ellison, Paul Joskow, Aviv Nevo, Rob Porter, Whitney Newey, Pat Bajari, Liran Einav, Brian McManus, Paul Ellickson and participants at numerous academic conferences, seminars and the 2003 National Association of Broadcasters/Broadcast Education Association Convention in Las Vegas for useful comments. I also thank Rich Meyer of Mediabase 24/7 for providing access to the airplay data and the National Association of Broadcasters for providing a research grant for the purchase of the BIAfn MediaAccess Pro database including the Arbitron share data. The paper has been much improved by the thoughtful insights of the editor Philip Haile and two referees. The previous title of this paper was “Coordination Games, Multiple Equilibria and the Timing of Radio Commercials”. All views expressed in this paper, and any errors, are my own.