The Impact of Media Attention: Evidence From the Automobile Insurance Industry

This article studies the interaction between media attention and corporate pricing behavior in the American automobile liability insurance market. Theoretical models developed in the economic literature predict that greater media attention (be it electronic or print) should reduce prices in the markets and that greater prices in the markets should increase media attention. Using quarterly data on liability insurance premiums for 48 states from 1985 to 1993—a period that includes the great liability insurance crisis in the United States—I test 2 hypotheses that can be derived from the theoretical literature on the economic impact of the media on the pricing behavior of corporations. Empirical results show automobile liability insurance premiums were lower when media applied pressure on the industry, thus lending support to the theoretical prediction that news media influence corporate pricing behavior.