Arbitrage and the video store
A discussion about excessive advertising over at Troppo Armadillo led me to think a bit about the fact that I never watch movies on commercial TV any more, because there are too many ads. Being an economist, I naturally like to assure myself that my conduct is rational, so I did the numbers.
The Media Watch story linked by Ken Parish indicates that TV stations are allowed 15 minutes of ads per hour, which implies that a 2-hour movie can be padded out with around 40 minutes of ads. This seems consistent with my memory of the last time I tried watching such a movie.
For most of the movies shown on commercial TV, I have the alternative option of walking to the video store up the street (10 minutes return) and hiring a video or DVD ($5 max). So, the trade-off is $5 vs 30 minutes. in effect, the TV station is paying me $10 an hour to watch ads. Since I value my time at more than $10 an hour, I choose the rental option.
This seemed convincing to me, but how generally applicable is it? Not everyone lives as close to a video store as I do, but then you can always rent a week’s worth of videos at a time, so the allocation of 10 minutes per movie seems reasonable. As regards the $10 an hour, I have, I think it a perfect arbitrage argument. The average video store pays $10 an hour, usually has casual work going, and, in most cases, will let the staff borrow reasonable numbers of videos free of charge.
fn1. I’m ignoring tax here, but if your marginal tax rate is an issue your time is worth more than $10 an hour.