A Simple Theory of Media

Professor, Graduate School of Economics, Faculty of Political Science and Economics, Waseda University. His fields of specialization include Contract Theory, Industrial Organization, Game Theory, Corporate Governance.

We study a model of endogenously repeated cheap talk in a Markovian environment. In each period, the uninformed party (the receiver, i.e. the public/readers) can consult the informed party (the sender, i.e. the media) at a cost. The sender, who is driven by profits, has an incentive to generate uncertainty in order to encourage future consultation. We find that both the sender and receiver can benefit from a higher cost of consultation, which dampens the sender's responsiveness to uncertainty and allows him to commit to similar likelihood of (re)consultation conditional on different messages, thereby reducing the sender's incentive to misreport.