Indirect Lobbying and Media Bias

In this paper, we study a model where voters have state-contingent preferences over policies and lobbies engage in influence activities to affect the information that a media outlet collects on the state of the world. The media outlet acts as a "filter" between lobbies and voters. It has to decide what to communicate to voters given the information it collects and its idiosyncratic bias. We show that, by targeting voters, lobbies are able to indirectly influence the political outcome and thus create a distortion in the political process. When the media outlet has a small idiosyncratic bias the (unique) equilibrium is characterized by a large level of lobbies' influence activities and no "news-slanting" by the media outlet. When the media outlet's idiosyncratic bias is large, the (unique) equilibrium involves a low level of lobbies' influence activities and a high probability of "news-slanting" by the media outlet. Moreover, we show that a higher idiosyncratic bias of the media outlet may be associated with a lower policy distortion and a higher voters' welfare. On the other hand, public policy measures aimed at increasing the cost of lobbies' influence activities would decrease the distortion in the policy outcome and increase voters' welfare. Finally, asymmetries in lobbies' influence activities lead to different probabilities of "news-slanting" by different media outlet's types.