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Mass media: constrained information and heterogenous public

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  • Kwiek, Maksymilian
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    Abstract

    This paper investigates how mass medium (sender) provides information to readers or viewers (receivers) who have diverse interests. The problem of the sender comes from the fact that there is a constraint on how much information can be delivered. It is shown that the sender can optimally provide information that is somewhat useful to all agents, but not perfect to anybody in particular. Because all receivers observe only one coarse signal delivered by the same mass medium their bahaviour is pefectly correlated, positively or negatively, even if the underlying states of nature are independent. In addition, if the correlation between states of nature of any two players is sufficiently high, their behaviour is positively correlated. However, we may have a situation where all agents are symmetric, the correlation of states of nature is negative (positive), but the behaviour is positively (negatively) correlated. The model can be used to explain the role of mass media in creating comovement among various industries during business cycle, or finacial contagion. Keywords; mass media, news, cheap talk, quantization, comovement, herding, contagion

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    File URL: http://eprints.soton.ac.uk/39654/1/0606.pdf
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    Bibliographic Info

    Paper provided by Economics Division, School of Social Sciences, University of Southampton in its series Discussion Paper Series In Economics And Econometrics with number 0606.

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    Date of creation: 01 Jan 2006
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    Handle: RePEc:stn:sotoec:0606

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