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Competing for the Public through the News Media

  • Baron, David P.

    (Baron, David P.)

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    Interest groups seek to influence economic activity through public and private politics. Public politics takes place in the arenas 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 each interest group seeks to influence public sentiment and does so by advocating its position 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 in not to regulate. The activist and the industry obtain private, hard information on the seriousness of the externality and advocate favorable information 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. Due to 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 the market failure by decreasing demand and a government failure by leading to regulation. The activist then has an incentive to conceal information unfavorable to its interests, whereas the industry fully reveals its information.

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    File URL: http://gsbapps.stanford.edu/researchpapers/library/RP1808.pdf
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    Paper provided by Stanford University, Graduate School of Business in its series Research Papers with number 1808.

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    Date of creation: Jun 2003
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    Handle: RePEc:ecl:stabus:1808
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    1. Timothy Besley & Robin Burgess & Andrea Pratt, 2002. "Mass media and political accountability," LSE Research Online Documents on Economics 35988, London School of Economics and Political Science, LSE Library.
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    3. Simon P. Anderson & Stephen Coate, 2000. "Market Provision of Public Goods: The Case of Broadcasting," NBER Working Papers 7513, National Bureau of Economic Research, Inc.
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    5. Erfle, Stephen & McMillan, Henry, 1990. "Media, Political Pressure, and the Firm: The Case of Petroleum Pricing in the Late 1970s," The Quarterly Journal of Economics, MIT Press, vol. 105(1), pages 115-34, February.
    6. Hansen, Claus Thustrup & Kyhl, Soren, 2001. "Pay-per-view broadcasting of outstanding events: consequences of a ban," International Journal of Industrial Organization, Elsevier, vol. 19(3-4), pages 589-609, March.
    7. David P. Baron, 2003. "Private Politics," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 12(1), pages 31-66, 03.
    8. Spence, A Michael & Owen, Bruce, 1977. "Television Programming, Monopolistic Competition, and Welfare," The Quarterly Journal of Economics, MIT Press, vol. 91(1), pages 103-26, February.
    9. Eli Noam, 1987. "A public and private-choice model of broadcasting," Public Choice, Springer, vol. 55(1), pages 163-187, September.
    10. Bovitz, Gregory L & Druckman, James N & Lupia, Arthur, 2002. " When Can a News Organization Lead Public Opinion? Ideology versus Market Forces in Decisions to Make News," Public Choice, Springer, vol. 113(1-2), pages 127-55, October.
    11. Krehbiel Keith, 1999. "Pivotal Politics: A Refinement of Nonmarket Analysis for Voting Institutions," Business and Politics, De Gruyter, vol. 1(1), pages 63-82, December.
    12. Esther Gal-Or & Anthony Dukes, 2003. "Minimum Differentiation in Commercial Media Markets," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 12(3), pages 291-325, 09.
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