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News Begets News: A Model of Endogenously Repeated Costly Consultation (with Mark Thordal Le Quement)

CIREQ-Concordia Seminar 2021-2022
Virtual Seminar Series in Information Economics and Experiments

joint with the Department of Economics, Concordia University

Organizers : Ming Li and Huan Xie (Concordia U.)

*  Virtual Seminar. Please contact one of the organizers for Zoom login information.

 


 
Résumé: We develop a model of endogenously repeated communication. Each period, the uninformed party (the receiver, i.e. the public) can consult the informed party (the sender, i.e. the media) at a cost. The sender, who is primarily driven by profit maximization, has an incentive to induce uncertainty in order to encourage future consultation and thereby generate revenue. We find that both the sender and receiver may be worse off with a cheaper cost of access since it leads the sender to distort information more, by making the receiver’s future consultation decision more responsive to the current report of the sender. We also examine the effect of competition/coordination between the senders and show that the degree of strategic independence positively affects the informativeness of the reports.

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