Micro‐costs: Inertia in Television Viewing

Inertia, defined as persistence in the default option, affects outcomes from organ donations to enrollment in retirement plans. A leading explanation for inertia is the cost of switching to an alternative option. Can consumers display inertia in a setting where this cost is negligible? If so, is this behavior systematic and significant enough to affect the profitmaximizing strategies of firms? This paper finds inertia in a setting in which the switching cost is extremely small: click of the remote in the choice of which television program to watch. In the absence of a significant switching cost, the audience of a program should not depend on the audience of the prior show on the same channel, controlling for the non-random assignment of programs. I find, however, that despite the negligible cost of switching: (i) male and female viewership of the news depends on whether the preceding show appealed to men or women, (ii) a 10 % increase in the demand for the prior show increases the demand for the current program by 2%-4%. I also find that viewer inertia decays over the duration of the subsequent show. These findings are consistent with quasi-viewer indifference towards programs, or procrastination in switching channels. Inertia in program choice affects the optimal program schedule and may influence as much as 20-40 % of channels’ profits.