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Competing for the Public Through the News Media

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  • David P. Baron
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    Abstract

    Interest groups seek to influence economic activity through public and private politics. Public politics takes place in the arena of public institutions, whereas private politics takes place outside public institutions often in the arena of public sentiment. Private politics refers to action by interest groups directed at private parties, as in the case of an activist group launching a campaign against a firm. This paper presents a model of informational competition between an activist and an industry, where both interest groups seek to influence public sentiment and do so by advocating their positions through the news media. Citizen consumers make both a private consumption decision and a collective choice on the regulation of a product that has an externality associated with it. In the absence of the news organization, the collective choice is not to regulate. The activist and the industry obtain private, hard information on the seriousness of the externality and provide favorable information to the news media and may conceal unfavorable information. The news media can conduct investigative journalism to obtain its own information, and based on that information and the information it has received from its sources, provides a news report to the public. Because of its role in society, the media has an incentive to bias its report, and the direction of bias is toward regulation. Its bias serves to mitigate both market failure by decreasing demand and a government failure by shifting votes in favor of regulation. The activist then has incentive to conceal information unfavorable to its interests, whereas the industry fully reveals its information. Copyright Blackwell Publishing 2005.

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    Bibliographic Info

    Article provided by Wiley Blackwell in its journal Journal of Economics & Management Strategy.

    Volume (Year): 14 (2005)
    Issue (Month): 2 (06)
    Pages: 339-376

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    Handle: RePEc:bla:jemstr:v:14:y:2005:i:2:p:339-376

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    Cited by:
    1. Jung, Hanjoon Michael, 2007. "Strategic Information Transmission through the Media," MPRA Paper 5556, University Library of Munich, Germany, revised Oct 2007.
    2. Zyglidopoulos, Stelios C. & Georgiadis, Andreas P. & Carroll, Craig E. & Siegel, Donald S., 2012. "Does media attention drive corporate social responsibility?," Journal of Business Research, Elsevier, vol. 65(11), pages 1622-1627.
    3. Sobbrio, Francesco, 2009. "Indirect Lobbying and Media Bias," MPRA Paper 18215, University Library of Munich, Germany.
    4. Thomas P. Lyon & John W. Maxwell, 2008. "Corporate Social Responsibility and the Environment: A Theoretical Perspective," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 2(2), pages 240-260, Summer.
    5. Baron, David P., 2004. "Persistent Media Bias," Research Papers 1845r, Stanford University, Graduate School of Business.
    6. Glen Whelan & Jeremy Moon & Bettina Grant, 2013. "Corporations and Citizenship Arenas in the Age of Social Media," Journal of Business Ethics, Springer, Springer, vol. 118(4), pages 777-790, December.
    7. Armando J. Garcia-Pires & Hans Jarle Kind & Lars Sørgard, 2012. "News Sources and Media Bias," CESifo Working Paper Series 3906, CESifo Group Munich.
    8. Y. Fassin, 2009. "Inconsistencies in Activists’ Behaviours and the Ethics of NGOs," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium, Ghent University, Faculty of Economics and Business Administration 09/576, Ghent University, Faculty of Economics and Business Administration.
    9. Aleix Calveras & Juan José Ganuza, 2014. "Building a reputation as a socially responsible firm," Economics Working Papers 1421, Department of Economics and Business, Universitat Pompeu Fabra.
    10. David Detomasi, 2008. "The Political Roots of Corporate Social Responsibility," Journal of Business Ethics, Springer, Springer, vol. 82(4), pages 807-819, November.
    11. Karen Moris, 2011. "La presse en tant que mécanisme de gouvernance disciplinaire," Revue Finance Contrôle Stratégie, revues.org, revues.org, vol. 14(4), pages 21-66, December.
    12. Yves Fassin, 2009. "Inconsistencies in Activists’ Behaviours and the Ethics of NGOs," Journal of Business Ethics, Springer, Springer, vol. 90(4), pages 503-521, December.
    13. Karen Moris, 2010. "La presse en tant que mécanisme de gouvernance disciplinaire - Press as a disciplinary governance mechanism," Working Papers CREGO, Université de Bourgogne - CREGO EA7317 Centre de recherches en gestion des organisations 1101003, Université de Bourgogne - CREGO EA7317 Centre de recherches en gestion des organisations.

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