Newspapers and public grants: A matter of quality
| Date | 01 February 2018 |
| Published date | 01 February 2018 |
| DOI | http://doi.org/10.1111/sjpe.12152 |
| Author | Alessandro Vaglio,Maria Rosa Battaggion |
NEWSPAPERS AND PUBLIC GRANTS:
AMATTEROFQUALITY
Maria Rosa Battaggion*,** and Alessandro Vaglio*
ABSTRACT
The present paper deals with the issue of newspaper subsidies in a framework of
endogenous quality provision. We compare monopoly and duopoly cases in a ver-
tically differentiated model. For monopolies we show that a per-copy subsidy
reduces quality. Conversely, in duopolies in the vertically differentiated model,
we show that a state subsidy might increase the quality of the low-quality news-
paper and decrease the quality of the high-quality newspaper.
1I
NTRODUCTION
Newspapers and mass media receive a high degree of attention on the political
agenda. It is well known that newspapers provide greater benefits to society
than to individual readers. In fact, in addition to the functions of informing
and entertaining, newspapers provide social services, including helping to
inform public opinion, expressing different and minority voices and perform-
ing the role of watchdog for public interest. Therefore, many countries have
provided newspapers with significant public grants in a variety of forms, such
as regulatory relief, fiscal advantages, and subsidies. Furthermore, newspapers,
as well as being affected by the economic and financial crisis that has contin-
ued for several years, are suffering from a structural crisis, as spaces for
growth in the supply of mature services are closing up while new development
opportunities related to the spread of the Internet do not seem to be able to
compensate for the income losses that are being registered. Therefore, public
subsidies tried to countervail the collapse of the newspapers and, at the same
time, to prevent the decrease in quality in the press market. However, newspa-
per subsidies might have unintended effects precisely on quality. In fact, the
introduction of a per-copy subsidy, to increase readership, may induce a
reduction in the quality level to sell more copies.
In this respect the present paper attempts to shed new light on the role of
subsidies in shaping the performance of the press market with a particular
focus on quality. For this purpose we should take into account some peculiar
features of the information and newspaper market.
*University of Bergamo
**ICRIOS Bocconi University
Scottish Journal of Political Economy, DOI: 10.1111/sjpe.12152, Vol. 65, No. 1, February 2018
©2017 Scottish Economic Society.
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