Notes on:

Handcuffs for the Grabbing Hand? Media Capture and Government Accountability

Author(s): Timothy Besley and Andrea Prat (2006)

Presenters: Frank Guan, Andreas Moller, William Snyderwine, Yu Yanchi, Biyuan Zhang

February 29, 2012

The media is the most basic and fundamental check on government for the people. The first

amendment to the constitution guarantees freedom of press from government interference indicating

the important role media plays in the political process. Media are supposed to keep the government

accountable to the people by reporting information back to the public. In some countries, however,

the media do a poor job reporting negative information about politicians and the government.

Besley and Prat model the causes of media reporting on government activity in order to further

examine the aspects that cause media outlets to report or withhold information from the public and

how this affects political outcomes.

The role of the media in the model is to provide information to the electorate so that they

can decide whether to keep the current party in power. In this model, the information is provided

endogenously so that it can be affected in some way by politicians. This becomes the key insight in

the paper because information is a commodity that can be bought. Because information can be

bought, bad information can be suppressed by crooked politicians.

The game has two aspects: one, between the media and the politician; the other, between the

electorate and the politician. In the first aspect of the game, the politician will give a signal that he

is ‘bad’ with a certain probability. This ‘badness’ is then discovered, or not, with a certain

probability by the media. The second aspect of the game involves the electorate’s decision to keep

an exogenously given incumbent based on information from the media. If the electorate receives

the signal from the media that the politician is bad, he will not be reelected. If no signal is received,

he is reelected with a certain probability.

It is important to further elaborate on the first aspect of the game. This aspect of the game

involves the possibility of media capture: the media is bribed by a politician to suppress negative

information. Each media provider has two sources of income: commercial profits and profits from

collusion with the government. Commercial profits are audience-driven and come in the form of

sales, ad revenue, etc. This profit is based on the ‘interestingness’ of the material provided. The

profits from the collusion with the government come in the form of bribes and legislative favors to

other interests of media outlet owners. For example, a politician could suppress a story by

promising the owner of a media outlet, who also owns a car company, that export taxes on cars will

be lowered. Thus, it isn’t a direct bribe, but still affords the media outlet revenue in an indirect way.

The interaction between media and politician can be better summarized by the following diagram:

G: good politician B: bad politician

S: signal if politician is bad S’: no signal received

P: payment to media P’: no payment to media

R: report bad politician to voter R’: no report to voter

It is important to note that these steps occur instantaneously. The choices made are

determined by the probabilities and payoffs established in the next section. It is assumed that if the

politician makes a payment to the media, then the media is captured. The final arrows point to the

voter. This will be further explained in the next section.

The paper establishes three main points: media pluralism prevents against capture;

independent ownership prevents capture; media capture affects political outcomes. The first point

shows that the more media outlets there are, the less likely of capture because it is too expensive for

the politician to bribe them all. Independent ownership is measured in this model by the degree of

difficulty involved in transferring a bribe to the media outlet; the more difficult it is to make the

transfer, the less likely will be the bribe and media capture. The political outcomes affected by

media capture are twofold: moral hazard and adverse selection. Moral hazard means if politicians

are less likely to be caught, they will extract more rent. In adverse selection, bad politicians are less

likely to be identified and replaced with media capture.

The baseline model will be extended in four ways to check for robustness: implications of

moral hazard and adverse selection; media entrance is endogenized; media outlets choose level of

monitoring; and payments to media outlets other than bribes. These four extensions will be

discussed in a later section.

Assumptions:

1. Exogenously given political party in power

2. Exogenously given number of media outlets

3. Homogenous electorate

4. Exogenously given information gathering technology

5. Only one media outlet needs to report bad signal for electorate to be informed

6. No signal is a good signal

Key Terms (By order of appearance)

I The Baseline Model

θ Type of politician θ ∈ {b, g}

g Good politician

b Bad politician

ɣ Probability that the politician elected is good

q Probability that the media will observe a verifiable signal that politician is bad

a Maximum potential audience-related benefit

m Number of media outlets reporting the news

ti Amount of monetary offer from politicians to media outlet i

τ Transaction cost incurred when politician offers monetary offer to media outlets

r, R Rent money extracted from voters by bad politician

I Set of media outlets that accept monetary offer from politician

s Signal if politician is bad. S = ∅ if no signal is reported

n Number of media outlets that are identical in terms of their payoff

A The sum of expected audience-related revenues for all outlets

II Extensions

y Amount of rent that the incumbent appropriates. y ∈ {0, 1}

Ѱ(y)q Probability of detection as a function of y

ŷ Optimal rent extraction level

ρ(q) Turnover rate of politicians

W(q) Expected voter welfare

c, C(∙) Fixed cost involved for a media outlet to become active

v Parameter that is uniformly distributed on a unit interval

ᴋ Parameter related to function C(∙)

ᴨ() Profit derived from a media outlet receiving an exclusive interview

I. The Baseline Model

We begin with an analysis of the three players involved in our model: The media, politicians,

and voters. The media is characterized by having two sources of income. Revenue comes in from

their subscribers, readers, or viewers in the form of subscription fees, advertising revenues, etc.

This revenue is denoted by variable a. The media’s second source of income comes from their

collaboration with politicians. This source of funding can be in the form of bribes, favorable

government policies, etc. For bad politicians, there is a probability p(S=b)=q that the media

agencies will report on his bad signals.

Politicians are defined as being either good or bad. The variable θ is used to take on the

values {bad, good}. The probability p(θ =g) is turns out to be equal to voter's utility ɣ because the

utility that voters derive from a good politician is set to be (1). This makes sense because voters

maximize their utility by maximizing the quality of the politician in office. An incumbent has the

ability to hide bad signals from being leaked out to the public by a transfer to all media companies.

This is because it is assumed that all media have the same information. Transfers to buy their

silence costs ti per media outlet and yields ti/τ to each media outlet i, where τ represents the

difficulty of making transfers, ranging from 0 for easy and ∞ for impossible. Legislative constraints

are one source of a high transfer cost. Besley and Prat differentiate between state-owned media,

who will have the lowest transfer costs, and privately owned media, which will have high transfer

costs. If the politician is re-elected, she will enjoy a payoff of r –∑𝑡i𝜖I and if not re-elected will lose

an amount –∑𝑡i𝜖I. The variable r denotes the amount of rent money, a bad signal, which can be

collected by a politician in office.

Voters are the last group of players in this model to be considered. After incumbents of type

{θ=b}, gives a bad signal, media agencies will report that piece of news with probability p(S=b)=q.

Incumbents will then make transfers ti for each media outlet i. If the media accepts the transfer of ti/

τ, it will report nothing, which is denoted by S = ∅. If the media outlet rejects the transfer, it will

report the signal (S = b) and receives compensation a/m. Variable m is the number of news outlets

actively investigating into the politician’s act of rent-seeking. If the media succeeds in exposing

such behavior, the voters will receive the signal and change their vote for the politician accordingly.

Key assumptions of the basic model are as follows:

1. Only verifiable information, or signals, can be published.

2. Signals can only be bad news about bad politicians.

3. All media are assumed to be identical in that they have the same technology and

journalistic skill, so they all have the same information.

4. The incumbent knows which signals the media have acquired.

5. The incumbent makes offers of hush money after these signals are verified.

Proposition 1: Equilibrium in the media market may be one of two kinds:

There are two cases in which equilibrium can occur. One case is with a captured media. If

n<r/ τa, each media outlet will be willing to suppress their signals about the incumbent for bribe ti =

τa. However, in the case of an independent media with n> r/τa, the incumbent can’t afford to bribe

all the media outlets and therefore each outlet reports its signal. The incumbent will only make

bribes to outlets if he can silence them all. He can only have such assurance if he offers a bribe of

ti > τa with a transfer cost of τ.

Proposition 2: Turnover of politicians, voter welfare, and total audience-related

revenues are nondecreasing in q, n, a, and τ.

To increase turnover, voter welfare, and audience related revenues, we would need greater

media independence (high τ), greater media commercialization (high a), media plurality (high n),

and high transparency and efficiency of news agencies (high q).

Captured media are those that have been bribed by the politician and thus, they do not

identify bad politicians. They do not give the voters the ability to decide to give the vote to the

incumbent or the opposition. In order to maximize the effectiveness of media agencies, it is

necessary not only to increase political transparency and news production efficiency (q), it is also

necessary to increase the number of media outlets n, and thus increase the expense incurred by

politicians wanting to capture them ti. A more independent media free of political intervention

would receive more attention from the voters, thereby increasing its maximum possible

commercialization, a. It is also possible to decrease the rents r that can be extracted by bad

politicians. Because the total cost of suppressing information nτa < r for transfers to be possible,

reducing r below nτa would make it impossible for transfers to be made. With an independent

media, bad politicians can now be identified. Now there will be a turnover rate: q(1- ɣ)>0

Expected Voter Utility in Round 1:

p(θ = g)U(g) + p(θ = b)U(b)

=γ(1) + (1 – γ)(0)

= γ

Note that it is established that voters get a utility of 1 from good politicians and a utility of 0

from bad politicians. However, the utility derived from a good politician must take into account the

probability that that politician is in fact a good one.

Expected Voter Utility in Round 2:

p(θ = g,g)U(g) + p(θ = b,b)U(b) + p(θ = b,g)U(b) + p(θ = b,b')U(b)

=(γ)(1) + (1 – γ)(1 – q)(0) + (1 – γ)(q)(γ)(1) + (1 – γ)(q)(1 – γ)(0)

= γ + (q)(1 – γ) γ

Note: b' is a challenger.

Also note that the expressions above show that total expected voter utility and the turnover

rate is higher with independent media. To illustrate the effects of a higher q, we take voter welfare

w and turnover rate ρ and summarize their behavior in terms of q.

w'(q) = (1 – γ) γ > 0

ρ'(q) = (1 – γ) > 0

As can be seen in Table 1, a study from 88 different countries shows that there is a

statistically significant correlation between the degree of state ownership of newspapers and the

number of years in office of the chief executive. In fact, high state ownership is associated with

7.21 years of increased tenure by the president or prime minister. A similar effect is also correlated

with the degree of concentration in ownership of the a country's newspapers. If newspapers

ownership is concentrated in the hands of only a few owners, the head of state is expected to be in

office 5.46 years longer than if newspaper ownership is concentrated in the hands of many, if all

other relevant variables are held constant.

High state ownership of newspapers and a high concentration in ownership of newspapers is

also associated with a higher degree of corruption. The difference between each point on the 7

point corruption scale between 0 and 6 is comparable to the difference in corruption levels between

Peru and the United States. The figures presented here, though crude, give support to this model as

it is described by Propositions 1 and 2.

II. Extensions

A. Moral Hazard

Compared with the baseline model fixed rent extraction, the main difference in the moral hazard

model is that incumbent can choose the amount of rent extraction. Also, the probability of being

caught by media when incumbents seeking rent is positive related to the amount of rent and the

intensity of media activity.

The amount of rent for incumbent: y ∈[0,1]

The amount of rent for voters: 1- y ∈[0,1]

Type g politician always chooses y=0

Type b politician has a linear benefit from rent (he has no reelection motive except getting rent

in the second term)

The probability of detection ψ(y)q (ψ’≥ 0,ψ′′ > 0,ψ(0) = 0,ψ′(0) = 0,ψ(1) = 1, lim𝑦→1𝜓

′(𝑦) = ∞ , 𝑞 ∈[0,1])

Turnover rate ρ(q) = ψ(�̂�(𝑞))q(1 − γ)

Suppose at least one media outlet is active and no media capture.

Good incumbent chooses y = 0 in both terms.

Bad incumbent chooses y =1 in the second term. Bad incumbent being reelected faces the

maximization problem of utility as follows:

max𝑦{𝑦 + 1 − 𝜓(𝑦)𝑞}

FOC ψ′(y)q = 1

Marginal cost of rent extraction due to a higher probability of detection is equal to the marginal

benefit of extra rent.

Rent appropriation by politicians: d�̂�

dq = −

𝜓′(�̂�)

𝜓′′(�̂�)𝑞< 0

Greater media activism reduces rent appropriation by politicians.

Turnover rate:

ρ(q) = ψ(�̂�(𝑞))q(1 − γ)

ρ′(q) = (𝜓(�̂�) + 𝜓′(�̂�)𝑞𝑑�̂�

𝑑𝑞)(1 − 𝛾)

Screening effect: Holding rent extraction fixed, increasingly active media (an increase in q)

are more likely to detect rent appropriation.

Discipline effect: An increase in q induces a reduction in rent extraction. Thus, it is less likely

that a bad incumbent is detected and removed from office.

Turnover is lower (higher) with increased monitoring if the discipline effect is more (less)

important than the screening effect.

Voter Welfare:

W(q) = 2γ + (1 − γ)[1 − �̂� + 𝜓(�̂�)qγ]

The first term is the voter welfare when a good incumbent sits in office for two terms. The se-

cond term is electing a bad incumbent in the first term and being caught and replaced by a good

incumbent in the second term.

The voter welfare is higher from media activism because the derivative of welfare function to q

is positive.

Voters might want bad politicians to consume some positive level of rent because it is the only

device for screening politicians.

Equilibrium rent seeking always exceeds the level desired by voters. Incumbents set ψ′(y)q =1, while voters’ marginal benefit from rent is 𝜓′(�̂�)qγ when marginal cost is 1. So it means

marginal revenue is lower than marginal cost. This makes greater media activism valuable on

the margin.

Expected TOTAL Rent:

R(q) = (1 − γ)[1 + �̂� − 𝜓(�̂�)qγ] The expected rent is decreasing in media activity because the derivative of expected rent to q is

negative.

The incumbent always choose a rent level below the expected rent-maximizing level. Because

he only cares about being reelected rather than the total rents extracted from voters. This makes

him more cautious in rent seeking than rent maximization would imply.

An increase in q accentuates this effect as well as reducing rents via screening effect.

Proposition 3: Suppose that there is both moral hazard and adverse selection. Then, the

effect of media activity, as measured by q, has an ambiguous effect on turnover of incum-

bents. Voter welfare is increasing in q and expected rents are decreasing in q.

B. Endogenous Media Entry

The model is as in the baseline case, except that the number of media outlets is now endogenous.

There are a large number of potential media outlets. Media outlets can enter the market by pay-

ing a fixed cost of c. A prior stage 0 is added. Each potential media outlets choose whether or

not to enter simultaneously and non-cooperatively. In addition, the media receive a signal with

probability q.

Assume qa>c such that at least one outlet is in the market. Focus on pure-strategy equilibria.

Proposition 4: Equilibrium in the media market may be one of two kinds:

(a) If mod(qa/c) > r/τa, the media industry is independent. The number of active media outlets

is m = mod(qa/c).

(b) If mod(qa/c) < r/τa, the media industry is captured. The number of active media outlets is m

= mod(r/τa).

r/τa is the maximum number of media that incumbent could pay. qa/c is the equilibrium number

of entrants under the independent media industry assumption.

In proposition 2, media plurality was an effective defense against capture. Now plurality is a

consequence of entry cost. The higher the entry cost, the more likely media are captured.

Barriers to entry in the media market lead to more capture and worse political outcomes.

C. Endogenous Monitoring

Background

Besides the exogenous factors that affect media outlets’ quality, the media outlets themselves could

vary their quality by making investment decisions.

- Quality of a media agency refers to its monitoring capacity. Sometimes, a media outlet only

need some information to do a good job while in more cases, it requires equipment such as tal-

ented personnel and high-quality technology to make the job possible. So a rational and ambi-

tious media outlet would strive for higher quality.

- For investment decision, resources put into monitoring quality require money, for example, hir-

ing talented people with higher salaries, or buying high quality cameras.

Assumption: The difficulty of detecting a bad type of incumbent is a random variable, denoted by v.

It is reasonable because credible news is a combination of qualified techniques and chances. If one

reporter has the camera in hand but missed the moment of the breaking news, no matter how

expensive the camera is, it’s still worth nothing and resulting in a wasted effort.

Model and Equilibrium

Media outlets are vertically differentiated in terms of quality.

- Each media outlet builds its monitoring capacity. Outlet i selects q in [0, 1] at the cost c(q). Reasonably, c(⋅) is increasing. Convexity and twice-differentiability guarantee that corner solu-

tions are avoided.

- Random variable v ~ uniform([0,1]) denotes the difficulty of detecting the scandal. An inter-

pretation is that, ifqi ≥ v, ith media outlet with qi monitoring effort is capable of receiving cred-

ible information of the incumbent being bad. If qi < v, then the case is a replication of baseline

model.

The number of informed media outlets, denoted by m, depends on what v is. The incumbent still

want to buy off either all of them or none of them when it’s out of control. In equilibrium, the cost

of buying off one outlet is τa. If and only if the incumbent’s money r is larger than m × τa, then

the incumbent chooses to bribe them. As a result, it is the maximum number of outlets that the

politician is willing and capable to pay off. If more than M outlets are informed, then the politician

gave up and the media are not captured.

Order all the media outlets in decreasing technology, so thatq1 ≥ q2 ≥ ⋯ ≥ qn, we have three

cases.

- v > q1, no media outlet is capable of being informed, the incumbent gets reelected.

- qM_+1 < v ≤ q1 , the informed media outlets are captured, get paid and the incumbent gets

reelected.

- qM_+1 ≥ v the informed media outlets are not captured, and the incumbent gets removed from

the office.

Thus, outlets fall into two categories.

- qM_+1 < q, media potentially captured, having a positive probability of being bought off by

government.

- qM+1 ≥ q, media always not captured and profit from audience share

Those results in lemma 5 and the FOC condition.

: LHS is the marginal cost and RHS is the

marginal revenue, denoted by a divided by

number of media outlets competing for audience

share.

This is the first-order derivative of c(q), plugging in�̂�(M + 1), which is the probability that a bad

incumbent is not reelected and determine the voter

welfare and turnover. In turn, this serves as a general

standard we should observe. Obviously, a higher a will

increase the incentives for media to buy better monitoring

technology and make it harder for the incumbent to

buying off the media. Also, it’s increasing in q, so we

have proposition 6. (See paper)

Implications

A better society should have more vertically differentiated media industry, in order to avoid the

situation that it’s too easy for government to buy off all or even no need to buy any of the media

outlets.

Examples are US media industry, which is highly vertically differentiated. Also there is the Italian

media industry, which is more flatly distributed just like media would be in a non-high-profile state.

C. Bribing as Access

Background

When the democratic system is better-established, cash transfers or media-biased policies may be

more difficult for government to adopt. A new friendly selective access could be considered such as

the prime minister granting an exclusive interview to one particular newspaper, which could

increases the commercial value of the chosen outlet.

Adjusted Model

- 𝐼𝑖 = {0,1}, 1 means ith media outlet gets the interview and keeps silent about scandals, 0 means

it does not getting the interview.

- �̂� denotes the number of outlets that have the interviews, the additional profit from the inter-

view is π(�̂�)

π(�̂�)will decrease when �̂� increases because when the government grant the same interview

opportunity to more outlets, the interview would be “cheap” to all of the outlets who got the

interview.

Assumption: granting interviews is not costly to the government. In fact the government is

benefiting from the interview since the effect of popularity among voters gets stronger for them.

Proposition

Straightforward to see that if π(n) > a the government is capable of silencing the whole media

industry as the benefit of reporting the scandal is less than the interview with the prime minister

even if all media outlets are interviewing the prime minister.

Implications

However, π(n) is decreasing in n when the number of media outlets increases. Thus, as the media

industry has a lower concentration, the “exclusive” interview is less attractive and valuable to each

media outlet compared to actually reporting the scandal.

BP suggests that this analysis could apply for a wider class of influences on the media industry

other than pure bribery. An interesting question left for the audience is to come up with new

methods for government to bribe media outlets.

Concluding remarks: generalized framework and parallels to Schleifer&Vishny

This model does perhaps not contain the most extraordinary new insights. The main

conclusions that media plurality and independence is desirable because of the controlling effect it

has on government, is hardly surprising. Neither is the conclusion that if a government is able to

constrain the media, the more likely it is to avoid being overturned.

The model does, however, provide a framework with predictions that are consistent with

observed cases as well as clear cut policy recommendations. The main strength of the model is

perhaps the simplicity with which it is set up, as well as how easily it allows for the model to be

extended, as seen. We have seen many phenomena such as moral hazard, endogenous market entry,

endogenous monitoring, and bribing and been implemented with only minor tweaks to the model.

In the following, we will give a brief introduction to how analysis can be carried out in a more

generalized framework, which conveniently allows for analysis of many more issues. Now assume

heterogeneity among the voters in the sense that some voters are flexible in their media choices,

while others are not. Why someone may not be can be explained by habits or a preference for news

of a certain political orientation. In the following framework

Outlet specific ai. This allows for the different outlets having different scope for commercial

profit, e.g. an outlet which reports national news has a larger potential than one which only

reports subject specific news.

Outlet specific τi. This allows for some outlets being less costly to bribe than others. An ex-

ample might be that government controlled outlets may be easier to pay off. There may also

be inherent differences in integrity.

Natural market share: σi.

Voters divided into a proportion, ϕ, of flexible viewers and 1-ϕ of inflexible viewers.

Extra step in game: After the media has reported the voters select outlets and votes based on

the signal this outlet reports.

As in the baseline model, the incumbent must compensate an outlet for any profits in order to

silence it. If we consider only sincere voting there is an equilibrium where the incumbent minimizes

cost of silencing whilst still gaining reelection:

𝐶∗ = min𝐽

(

(1 − 𝜑)∑ 𝑎𝑖𝜏𝑖𝜎𝑖𝑖∈𝐽 + 𝜑∑𝑎𝑖𝜏𝑖𝜎𝑖

∑ 𝜎𝑗+𝜎𝑖𝑗∉𝐽

𝑖∈𝐽 )

, subject to ∑ 𝜎𝑖𝑗∈𝐽 ≥ 𝑚𝑖𝑛 (1,1

2(1−𝜑))

Where J is a subset of outlets that the individual outlets conjectures will suppress their signal.

To understand this problem, skip ahead to the equilibrium condition: the cost of silencing any outlet

is equal to the additional profit the outlet would receive from reporting the informative news, which

is given by:

(1 − 𝜑)𝑎𝑖𝜎𝑖 + 𝜑𝑎𝑖𝜎𝑖1

∑ 𝜎𝑗𝑗∉𝐽

+𝜎𝑖 (*)

The first term is forgone potential revenue from the inflexible viewers who won’t get

informative news, and the second term is forgone revenue from all the flexible viewers the outlet

could potentially have attracted. The latter is multiplied by a factor such that the less are getting

their informative news from other outlets that aren’t bribed, the larger the effect.

The interpretation of incumbent’s problem is now clear: as the term in the brackets is

essentially the same as (*), but summed over all the outlets that he pays off and corrected be the

transfer cost. The constraint to the incumbent’s problem says that the incumbent needs at least half

the voters to stay uninformed. If φ≥½ the incumbent needs to bribe the whole media industry, but if

φ <½ it is only needed to buy out the outlets which have a market share at or above 1

2(1−𝜑), which

represents half of the viewers, corrected for the fact that some viewers are not going to switch outlet

to get informative news, and are thus uninformed without costing the incumbent anything.

To increase the cost of capture, increase ai and τi as in the baseline model. Also, in general,

the effect of more outlets is still to increase cost of capture. But now note that C is also increasing in

φ, that is, the more inflexible viewers; the easier it is to capture the media. It is now easy to see that

voters who are just generally uninformed will have an effect similar to that of the inflexible viewers

above – in a broader framework, we could also relate this to totalitarian regimes wanting to keep the

populous uneducated. It is now also easily imagined how the above extends to analysis of direct

censoring, random potential for rent extraction and much more.

The probability of a bad incumbent being revealed, the expected turnover, and voter welfare

are given, respectively, by:

𝑃 = 𝑞𝐹(𝐶∗) 𝑇 = (1 − 𝛾)𝑞𝐹(𝐶∗)

𝑈 = (2 + (1 − 𝛾)(𝑞𝐹(𝐶∗))) 𝛾

Where F(.) is an increasing function of C. The above expressions confirm the results of the

the baseline model as all three measures depend on the cost of capture in the expected way.

Schleifer and Vishny also analyze bribes from government to firms with varying degree of

public private and public ownership. Their model is broader in the sense that there is more

interaction between politicians and managers; both can bribe each other and the politicians want to

obtain favors from the firms (in the form of excess employment) as well as get their revenue share,

while the managers want subsidies from the politicians. In B&P, we only look at one way

interactions, but the notion of obtaining “favors” is similar.

The focus of S&V is somewhat different from B&P especially in the first half of their paper, but in

particular in the extensions there are related implications. Loosely paraphrasing the related results

from propositions 10-15:

1. With a higher cost of transfers, there will generally be fewer transfers between government

and private firms.

2. Constraining the use of subsidies generally leads to more desirable outcomes (as seen from

the voters).

3. Politicians generally prefer control of the firms’ decisions and less meddling by the voters.

The first point is only a result of S&V. However, in B&P it is much more integral to the setup of the

model. Transaction costs feed directly into the parameter τ, but the implications of variations in τ

are comparable (see B&P proposition 2).

The second point from S&V is that by limitation of the possibility for politicians to use subsidies,

the incentive for politicians to achieve inefficient levels of labor employment weakens – not only

strictly the use of subsidies. In B&P, this conclusion is arguable more ambiguous: The removal of

the subsidy option would likely raise τ, as subsidies are probably a very efficient way of paying off

the media, and hence raise the cost of media capture. Subsidies to media are indeed prevalent

particularly in Europe. If the subsidy is given directly to the media industry, however, the

endogenous media entry extension of the model predicts that lower entry costs would have the

opposite effect through increased media plurality. In S&V, the concept of actual subsidies is more

important for the model than in B&P, where subsidies are just modeled as one of many methods of

paying off media.

The last point also relates the fact that politicians in S&V can be able to dictate the action of the

firm (through regulation etc.). In B&P this feeds into the model through to the parameter τ, as it was

assumed that it is cheaper to bribe institutions that are tied to the government in some form.

What is referred to in S&V as a notion of treasury oversight or a monetary policy maker, is also

referred to as the “voters and taxpayers influence”. This latter term is key in relating this to B&P. In

the voter segmentation extension in this section, we could see the involvement of the voters as their

flexibility in choosing media outlets. Now the more involved/flexible the voters are, the better they

achieve keeping the politicians in check – in this sense, the two models overlap nicely.