The Political Economy of Strategic Communication

This thesis contains three chapters exploring the implications of strategically biased information on political outcomes. The first chapter studies how a politically motivated media outlet misreports information in order to endorse its preferred candidate during an election. The task of identifying the reporting strategy through which an interested outlet can influence the decision of voters is non-trivial as there are many ways in which this can be done. I show that there is only one plausible equilibrium, where the media outlet ``pools'' information in a way that sways the decision of the median voter -- and therefore of a majority of electors. The second chapter investigates how media bias skews electoral competition and produces distortions in the process of policy formation. I develop a model of communication with endogenous policy-making. Candidates running for office know that information passes through the lens of an interested media outlet before reaching the electorate. This generates tension between pandering to the voter with a populist policy, or pleasing the outlet with a biased policy. I show that the implications of media bias are not confined to distortions of the voters' choice at the ballot box, but they propagate back to the process of policy-making. In the third chapter, I study to what extent competing forces in the market for news are beneficial for voters. I explore a model where (i) media outlets compete for influence by providing alternative views of the same stories, and (ii) relevant information spreads quickly, and eventually voters listen to all viewpoints. In equilibrium, both media outlets reveal their private information with positive probability, and misreport otherwise. I find that even though competition triggers more news distortions, it always outperforms monopoly: ``diversity of opinion'' has a value independently of the additional media outlet's bias -- even if it is extremely biased.