Research Paper No. 1808 COMPETING FOR THE PUBLIC THROUGH THE NEWS MEDIA David p, baron St anford University June 2003 Int erest groups seek to influence economic activity through public and private polit ics. Public politics takes place in the arenas of public inst it utions, whereas private polit ics takes place out side public inst itutions oft en in the arena of public sentiment. Private politics refers to action by interest groups direct ed at privat parties, as in the case of an activist group launching a campaign against a firm This paper present s a model of informational compet ition bet ween an activist and n indust ry, where each int erest group seeks to influence public sent iment and does so by advocat ing its position through the news media. Citizen consumers make both a private consumption decision and a collect ive choice on the regulation of duct t hat ext ernality associat ed with it. In the absence of the news organization the collect ive choice in not to regulate. The act ivist and the industry obt ain private, hard information on the seriousness of the externality and advocate favorable information and may conceal unfavorable informat ion. The news media can conduct investigative journalism to obt ain it s own information and based on that information and the informat ion it has received from its sources, provides news report to the public. Due to it s role in societ media has an incent ive to bias its report, and the direct ion of bias is toward regulat ion. Its bias serves to mitigate bot h the market failure by decreasing demand and a government failure by leading to regulation. The act ivist then has an incentive to conceal information unfavorable to it s int erest s, whereas the indust ry fully reveals its informationResearch Paper No. 1808 COMPETING FOR THE PUBLIC THROUGH THE NEWS MEDIA David P. Baron Stanford University June 2003 Abstract 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