Handbook of Media Economics, vol 1B

standard economic theory. This has been argued at least since Downs’s (1957) model of

rational ignorance. The explicit modeling of this externality helps us describe the nature

of the problem and the optimal regulation to solve it.

Should this be implemented by regulated private firms or by public service media?

The generic arguments from

Hart et al. (1997) apply. An argument in favor of public

service media is that the amount and informativeness of political coverage are hard to

observe and hence in some dimensions non-contractible. Private providers are likely

to save costs by reducing quality in these dimensions. There are two main arguments

against public service media. One is that these may not be independent of the politicians

they are supposed ...