5th Workshop on Media Economics Voluntary censorship in commercial media Fabrizio Germano Department d’Economia I Empresa, Universitat Pompeu Fabra Joint with: Martin Meier Institut d’Anàlisis Econòmica, UAB

5th Workshop on Media Economics Aim of the paper To write a model which properly considers the accuracy of information To explain how commercial media treat such information within different frameworks Monsanto – Coca Cola example?

5th Workshop on Media Economics Assumption: final consumption of the advertisers’ goods inversely depends on this information Model: Hotelling type model – to allow competition between more than two firms the authors resort to a special case of the spokes model of Chen and Riordan (2007) All markets are covered (all “potential” media products are supplied)

5th Workshop on Media Economics The authors consider competition between two types of media outlets: commercial and noncommercial Consumers are distributed uniformly along the n endpoints of the spokes and have preferences for only two of the n spokes Media outlets maximize profits (advertising + payments from the audience – costs of producing their programming)

5th Workshop on Media Economics Main Results Voluntary Censorship can occur in a market with too few firms While audience funded commercial media would tend to be fully informative, the possibility of drawing revenues from advertisers minimizes this effect Commercial media can crowd out noncommercial ones when revenues from advertising are sufficiently large

5th Workshop on Media Economics The authors introduce the parameter t (at page 4) and simply state that it represents a transportation cost. As the results in Proposition 3 depend on t, I would suggest to spend more time on explaining the importance of such parameter within the spokes model. The model

5th Workshop on Media Economics A commercial media outlet maximizes profits, given by: Commercial media This parameter is equal for all firms. Could it be endogenized?

5th Workshop on Media Economics Regarding Proposition 1, its results are somehow “extreme”: for low values of n there is a unique equilibrium with full voluntary censorship; for intermediate values of n there are multiple equilibria, while for high values of n there is a unique fully informative equilibrium In particular, how can you interpret the intermediate case? Advertising funded media

5th Workshop on Media Economics Regarding Proposition 2, also its results looks “extreme”: a unique fully informative equilibrium Audience funded media Audience and adv funded media As introduced before, results in Proposition 3 depend on t (for low values of t the media are exclusively advertising funded); could the authors explain the importance of the transportation cost?

5th Workshop on Media Economics In case of multiple ownership, there are again extreme results but here allowing firms to own multiple media outlets makes censorship more likely. The intuition: having multiple media outlets gives the media firms additional monopoly power Audience vs adv funded media -

5th Workshop on Media Economics Non commercial media maximize utility provided to the audience Proposition 5: there is a unique fully informative equilibrium Non Commercial media

5th Workshop on Media Economics Two types of media outlets An increase in the budget allocated to non-commercial media can crowd out commercial media An increase in base consumption tends to crowd out non-commercial media Commercial media and non- commercial media

5th Workshop on Media Economics To conclude:  Really nice idea, properly modeled  Results are somehow extreme, depending mostly on threshold levels of n  Importance of t  Policy implication: expand n in case of voluntary censorship?