Good Intentions, Bad Results: The Effects of Newspaper Subsidies on Journalistic Quality

Abstract

News media play an irreplaceably important role in the successful working of democratic societies: they guarantee that citizens have access to information, are accurately informed, and actively take part in the political process. A crucial factor for the effective fulfillment of these democratic functions is an adequate level of journalistic quality.

Appendices

Appendix 1

Equation (5.6) is an implicit function of the optimal level of quality, q*. We define this function as

$$ f(q):=\frac{\partial \pi }{\partial q}=n{g}^{\prime }(q)- n \mathit{^2}{h}^{\prime }(q)-{c}^{\prime }(q)=0. $$

(5.12)

Before proceeding, it may be helpful to state the second-order condition for a profit maximization is that the Hessian be negative semi-definite. This will be the case if

$$ \frac{\partial^2\pi }{\partial n \mathit{^2}}\frac{\partial \mathit{^2\pi }}{\partial q \mathit{^2}}-{\left(\frac{\partial \mathit{^2\pi }}{\partial n\partial q}\right)}^2>0, $$

(5.13)

because, under given assumptions, (∂² π/∂n ²) = − 2h − k″(n) + r″(n) < 0. It thus follows, if an interior maximum exists, that (∂² π/∂q ²) < 0.

By application of the Implicit Function Theorem to Eq. (5.12), we therefore find that

$$ \frac{\partial q*}{\partial n}=-\frac{\frac{\partial f}{\partial n}}{\frac{\partial^2\pi }{\partial {q}^2}}=-\frac{g\prime (q)-2 nh\prime (q)}{\frac{\partial^2\pi }{\partial {q}^2}}. $$

(5.14)

Clearly, Eq. (5.14) is negative if g′(q) < 2nh′(q) or n > (g ′ (q *)/2h ′ (q *)).

Appendix 2

Quality-related taxes change the first-order condition of profit maximization with respect to the choice of quality to:

$$ f(q):=\frac{\partial \pi }{\partial q}=n{g}^{\prime }(q)- n \mathit{^2}{h}^{\prime }(q)-{c}^{\prime }(q)+\gamma =0. $$

(5.15)

Again, Eq. (5.15) constitutes an implicit function of the optimal level of quality. Applying the Implicit Function Theorem yields:

$$ \frac{\partial q*}{\partial \gamma }=-\frac{\frac{\partial f}{\partial \gamma }}{\frac{\partial 2\pi}{\partial q2}}=-\frac{1}{\frac{\partial 2\pi}{\partial q2}}>0. $$

(5.16)