All cit izens with valuat ions at least us+, + +)purchase the product, so the external is(1-8+)+X(s+, +)=(1-8+)+N(1-2s. ). Regulation directly reduces the emissions and also reduces demand which furt her reduces emissions. The ext ernality is stronger the more compet itive is the indust ry and weaker the more consumers int ernalize Since the externality is a pure public bad, every citizen incurs the harm. Consequent ly the utility U,(s+, +; u) of a cit izen with vff s+, ++)is U1(s+,+;)=(1-s+)-f{s+,+)-(1-s+)+x(s+,+)-(1-s+)+(aN-1) 1-0+)(=n+1)+n+1-s+)+aN-(1-s+)+aN-1) S,→ )(1-s+)+N The utility Uo(s+, t; u) of a citizen who does not purchase U The news media has an opport unity through the report it present s about -to ae ect private and public polit ics. Private politics pert ains to the consumption decisions of cit izen, and public polit ics corresponds to the collective choice of the regulation. Or influence of the news media on private politics is to ae ect demand for the produc considered in Section x, the media might also be able to ae ect demand through moral suasion. The influence on public polit ics is through the portion of the public that supports regulat lon C. Collective Choice Public polit ics governs the choice of t he regulation, where the st at us quo is no regula- tion(s+=0). Pivot al polit ics theory(Krehbiel(1998)(1999 )) predicts that a change in the stat us quo can require a supermajority to overcome a filibust er in the Senate or override a presidential veto. A supermajority may also be required to overcome vote buying(grose- se and Snyder(1996)). The relation bet ween cit izen preferences and the supermajority required to change the st at us quo is not known, however, so inst ead of modeling the in stit ut ions, the supermajority y of the public required for regulat ion to be enact ed will be taken as a paramet er where 122. Each cit izen is assumed to act as if she is pivot al
All citizens with valuations at least v∗(s+, θ+) purchase the product, so the externality is (1 − s+)θ+X(s+, θ+) = (1 − s+)θ+N(1 − v∗(s+,θ+) vˆ ). Regulation directly reduces the emissions and also reduces demand which further reduces emissions. The externality is stronger the more competitive is the industry and weaker the more consumers internalize it. Since the externality is a pure public bad, every citizen incurs the harm. Consequently, the utility U1(s+, θ+; v) of a citizen with v≥v∗(s+, θ+) is U1(s+, θ+; v) = v(1 − αs+) − y∗(s+, θ+) − (1 − s+)θ+X(s+, θ+) − (1 − s+)θ+(ηN − 1) = (1 − αs+) v − vˆ n + 1 + 1 n + 1(1 − s+)θ+ηN − (1 − s+)θ+(ηN − 1) − 1 − v∗(s+, θ+) vˆ (1 − s+)θ+N. (6) The utility U0(s+, θ+; v) of a citizen who does not purchase is U0(s+, θ+; v) = −(1 − s+)θ+X(s+, θ+). (7) The news media has an opportunity through the report it presents about θ to affect both private and public politics. Private politics pertains to the consumption decisions of citizens, and public politics corresponds to the collective choice of the regulation. One influence of the news media on private politics is to affect demand for the product. As considered in Section X, the media might also be able to affect demand through moral suasion. The influence on public politics is through the portion of the public that supports regulation. C. Collective Choice Public politics governs the choice of the regulation, where the status quo is no regulation (s+ = 0). Pivotal politics theory (Krehbiel (1998)(1999)) predicts that a change in the status quo can require a supermajority to overcome a filibuster in the Senate or override a presidential veto. A supermajority may also be required to overcome vote buying (Groseclose and Snyder (1996)). The relation between citizen preferences and the supermajority required to change the status quo is not known, however, so instead of modeling the institutions, the supermajority γ of the public required for regulation to be enacted will be taken as a parameter where γ≥ 1 2 . Each citizen is assumed to act as if she is pivotal. 14
A citizen who does not purchase the product prefers regulation because she only bears the harm from the emissions, as indicat ed in(7). The valuat ion v(s+, 0+) of the citizen who purchases and is indifferent bet ween st=s and no regulation is, using(6), defined by U/1(0,0+;v(s+,0+)-U1(s Solving for vo(st, 0+) yields n工+a+10M=a(n-7+m+1(0-)1-ao+) Appendix a present s condit ions such that vo(s, 0+<i and vo(s+, 0+)>u*(st, 0+),and these conditions will be assumed to be sat isfied. Since U( is increasing in v, all cit izen with u>u(st, 0t) oppose regulation. The support for regulation is decreasing in the com- etitiveness of the indust ry and is increasing in the number N of cit izen affect ed by the externality. The support for regulation is decreasing in i, and limji-oo"=n The valuation vo(st, 0+)of the cit izen who is indifferent bet ween regulation and no regulation is increasing in s for a> l, so a higher st andard receives less support from among the purchasers of the product. The valuation v(s, 0+) of the indifferent cit izen is increas- ing in 0+ when 2(2-a-8+)ne+mN 0> (n-n+(n+1)(m-)(1-as+) in which case support for regulat ion increases as the ext emality becomes more severe. This condition is sat isfied when n is small. If the failure to regulat e the ext emality is viewed as a government failure, a news report that the ext ernality is serious may mitigate a government failure when(9)is sat isfied The support f alation also depends on the ext ent to which cit izen internalize th exte litv. The derivative dr°( (7+1)(1-a8+) ((1-as+)-(2-a-s+)0+N (10) Ifthe ext ernality is costly(0+N>0), the derivative is negative, so greater ot her-regardedness reduces the support for regulation. Support for regulation decreases because an increase in n shift s demand downward, which lessens the effect of the ext ernality. To the ext ent that
A citizen who does not purchase the product prefers regulation because she only bears the harm from the emissions, as indicated in (7). The valuation vo(s+, θ+) of the citizen who purchases and is indifferent between s+ = s and no regulation is, using (6), defined by U1(0, θ+; vo(s+, θ+)) − U1(s+, θ+; vo(s+, θ+) ≡ 0. Solving for vo(s+, θ+) yields vo(s+, θ+) = vˆ n + 1 + θ+N (n + 1)αvˆ(1 − αs+) n − η + (n + 1) η − 1 N vˆ(1 − αs+) − (2 − α − s+)nθ+ηN . (8) Appendix A presents conditions such that vo(s+, θ+)<vˆ and vo(s+, θ+)>v∗(s+, θ+), and these conditions will be assumed to be satisfied. Since U1(·) is increasing in v, all citizens with v>vo(s+, θ+) oppose regulation. The support for regulation is decreasing in the competitiveness of the industry and is increasing in the number N of citizens affected by the externality. The support for regulation is decreasing in ˆv, and limvˆ→∞ vo vˆ = 1 n+1 . The valuation vo(s+, θ+) of the citizen who is indifferent between regulation and no regulation is increasing in s for α>1, so a higher standard receives less support from among the purchasers of the product. The valuation vo(s+, θ+) of the indifferent citizen is increasing in θ+ when vˆ > 2(2 − α − s+)nθ+ηN (n − η + (n + 1)(η − 1 N ))(1 − αs+) , (9) in which case support for regulation increases as the externality becomes more severe. This condition is satisfied when η is small. If the failure to regulate the externality is viewed as a government failure, a news report that the externality is serious may mitigate a government failure when (9) is satisfied. The support for regulation also depends on the extent to which citizens internalize the externality. The derivative is dv0(θ+, s+) dη = θ+Nn α(n + 1)ˆv(1 − αs+) (ˆv(1 − αs+) − (2 − α − s+)θ+N). (10) If the externality is costly (θ+N>vˆ), the derivative is negative, so greater other-regardedness reduces the support for regulation. Support for regulation decreases because an increase in η shifts demand downward, which lessens the effect of the externality. To the extent that 15