Can media drive the electorate? The impact of media coverage on voting intentions

A growing literature uses media data to explain perception and behaviour in the economic and political context. In this paper, we investigate how media coverage affects political preferences, namely voting intention. For our empirical analysis, we merge 14 years of human-coded data obtained from leading media in Germany with results of the comprehensive German Politbarometer survey from February 1998 through December 2012. In contrast to the existing literature, we do not utilize access to certain media outlets, but use the tonality of articles and newscasts on political parties and politicians based on human coded media data. To account for endogeneity, we employ instrumental variable probit estimations. In addition, we control for a multitude of (internal) personal characteristics, such as age, and gender, as well as for (external) macroeconomic variables, such as business climate, unemployment, and inflation. The results show that media coverage of a political party has a positive and significant effect on the voting intention for this party. When media outlets cover a political party more positively, the electorate has a greater tendency to vote for it. Hence, we conclude that the electoral success or failure of political parties is at least partially caused by the media coverage on them. This hints on the special responsibility of media in democracies.     

Insider trading with public and shared information

We study the impact of public information and shared information on traders' trading behavior in the context of Kyle's (1985) speculative market. We suppose that there are four types of traders in our model: one insider, M outsiders, liquidity traders, and market makers. We explicitly describe the unique linear Nash equilibrium and find that public information harms the insider but benefits the outsiders and noise traders. Also, the market is more efficient because of the existence of public information.     

Asymmetric partnerships

We study asymmetric partnerships and show that efficient dissolution is possible if critical types (where participation constraints bind) are equal. Ownership structures guaranteeing equal critical types always exist, but can be extremely unequal.     

Mechanism design with collusive supervision

We analyze an adverse selection environment with third party supervision. The supervisor is partly informed of the agent's type. The supervisor and the agent collude while interacting with the principal. Contracting with the agent directly and ignoring the presence of the supervisor constitutes the no-supervision benchmark. We show that delegating to the supervisor reduces the principal's payoff compared to the no-supervision benchmark under a standard condition on the distribution of the agent's types. In contrast, if the principal contracts with both the agent and the supervisor, there exists a mechanism that improves the principal's payoff over the no-supervision payoff.     

Newspaper Circulation and Local Government Efficiency*

In this paper, we examine the role of the newspaper market for a key aspect of political accountability: the efficient use of public funds by elected politicians. Newspapers are a major provider of the political information voters use to monitor their elected officials, especially at the local level. Thus, the incentives for politicians to reduce budgetary slack should be stronger in jurisdictions where the electorate is well informed by newspapers. Using panel data on the circulation of some 150 newspapers in Norwegian municipalities, we show that increases in local newspaper circulation are associated with higher levels of local government efficiency.     

Persuasion,binary choice,and the costs of dishonesty

We study the strategic interaction between a decision maker who needs to take a binary decision but is uncertain about relevant facts and an informed expert who can send a message to the decision maker but has a preference over the decision. We show that the probability that the expert can persuade the decision maker to take the expert’s preferred decision is a hump-shaped function of his costs of sending dishonest messages.     

Ideological polarization and the media

Greater media presence may facilitate information transmission and consensus or amplify existing political differences. In the OECD greater media penetration is strongly correlated with reduced ideological polarization. Media penetration increases lead reductions in polarization, suggesting that this relationship is causal.     

Optimal limited authority for principal

This article studies a principal-agent problem where the only commitment for the uninformed principal is to restrict the set of decisions she makes following a report by the informed agent. We show that an ex ante optimal equilibrium for the principal corresponds to a finite partition of the state space, and each retained decision is ex post suboptimal for the principal, biased toward the agent?s preference. Generally an optimal equilibrium does not maximize the number of decisions the principal can credibly retain. Compared to no commitment, limited authority improves the quality of communication from the agent. As a result, it can give the principal a higher expected payoff than delegating the decision to the agent.     

Robustness of equilibria in anonymous local games

This paper studies the robustness of symmetric equilibria in anonymous local games to perturbations of prior beliefs. Two priors are strategically close on a class of games if players receive similar expected payoffs in equilibrium under the priors, for any game in that class. I show that if the structure of payoff interdependencies is sparse in a well-defined sense, the conditions for strategic proximity in anonymous local games are strictly weaker than the conditions for general Bayesian games of Kajii and Morris (1998) [11] when attention is restricted to symmetric equilibria. Hence, by exploiting the properties of anonymous local games, it is possible to obtain stronger robustness results for this class.     

ROBUST RATIONALIZABILITY UNDER ALMOST COMMON CERTAINTY OF PAYOFFS

An action is robustly rationalizable if it is rationalizable for every type who has almost common certainty of payoffs. We illustrate by means of an example that an action may not be robustly rationalizable even if it is weakly dominant, and argue that robust rationalizability is a very stringent refinement of rationalizability. Nonetheless, we show that every strictly rationalizable action is robustly rationalizable. We also investigate how permissive robust rationalizability becomes if we require that players be fully certain of their own payoffs.     

Equilibrium selection in global games with strategic complementarities

We study games with strategic complementarities, arbitrary numbers of players and actions, and slightly noisy payoff signals. We prove limit uniqueness: as the signal noise vanishes, the game has a unique strategy profile that survives iterative dominance. This generalizes a result of Carlsson and van Damme (Econometrica 61 (1993) 989-1018) for two-player, two-action games. The surviving profile, however, may depend on fine details of the structure of the noise. We provide sufficient conditions on payoffs for there to be noise-independent selection.     

Bid rotation and collusion in repeated auctions

This paper studies bidder collusion with communication in repeated auctions when no side transfer is possible. It presents a simple dynamic bid rotation scheme which coordinates bids based on communication history and enables intertemporal transfer of bidders’ payoffs. The paper derives a sufficient condition for such a dynamic scheme to be an equilibrium and characterizes the equilibrium payoffs in a general environment with affiliated signals and private or interdependent values. With IPV, it is shown that this dynamic scheme yields a strictly higher payoff to the bidders than any static collusion scheme which coordinates bids based only on the current reported signals.     

An efficient solution to the informed principal problem

In this paper I study mechanism design by an informed principal. I show that generically this problem has an ex-post efficient solution. In the equilibrium mechanism, the informed principal appropriates all expected social surplus, with each type of her getting all expected social surplus conditional on that type. This outcome is supported as a perfect sequential equilibrium of the informed principal game when the joint probability distribution from which the agents’ types are drawn satisfies two conditions: the well-known condition of Cremer and McLean and Identifiability condition introduced by Kosenok and Severinov [Individually rational, budget-balanced mechanisms and allocation of surplus, J. Econ. Theory (2002), forthcoming]. Conversely, these conditions are necessary for an ex-post efficient outcome to be attainable in an equilibrium of the informed principal game. Under these conditions only our equilibrium outcome constitutes a neutral optimum, i.e. cannot be eliminated by any reasonable concept of blocking [R. Myerson, Mechanism design by an informed principal, Econometrica 51 (1983) 1767-1797]. Identifiability and Cremer-McLean conditions are generic when there are at least three agents, and none of them has more types than the number of type profiles of the other agents.     

Efficient collusion in repeated auctions with communication

This paper studies collusion in repeated auctions when bidders communicate prior to each stage auction. For independent and correlated private signals and general interdependent values, the paper identifies conditions under which an equilibrium collusion scheme is fully efficient in the sense that the bidders’ payoff is close to what they get when the object is allocated to the highest valuation bidder at the reserve price in every period.     

Generalized potentials and robust sets of equilibria

This paper introduces generalized potential functions of complete information games and studies the robustness of sets of equilibria to incomplete information. A set of equilibria of a complete information game is robust if every incomplete information game where payoffs are almost always given by the complete information game has an equilibrium which generates behavior close to some equilibrium in the set. This paper provides sufficient conditions for the robustness of sets of equilibria in terms of argmax sets of generalized potential functions. These sufficient conditions unify and generalize existing sufficient conditions. Our generalization of potential games is useful in other game theoretic problems where potential methods have been applied.