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Newspaper Reports and Consumer Choice: Evidence from the Do Not Call Registry

Khim-Yong Goh,* Kai-Lung Hui, ** and I.P.L. Png*

February 2010

Abstract

* National University of Singapore; ** Hong Kong University of Science and Technology. Corresponding author: Ivan Png, NUS Business School, National University of Singapore, 15 Kent Ridge Drive, Singapore 119245, Singapore. We thank Hal Varian for pointing us to the federal Do Not Call registry, and Junhong Chu for valuable comments.

Despite annual U.S. expenditures on public relations exceeding $19.42 billion, businesses lack practical guidance about the effectiveness of publicity on sales. Here, we assembled a rich and novel dataset of newspaper reports and consumer sign-ups with the U.S. “do not call” (DNC) registry to gauge the impact of news reports on consumer behavior. We found robust evidence that news reports did increase DNC registration. Specifically, a one percent increase in the number of news reports would raise DNC registrations by 0.02 percent. This estimate provides an upper bound on the sales-response function for media publicity.

We also found that the politics of newspapers matters. Only reports in neutral newspapers (unaffiliated with either Democratic or Republican party) affected DNC registrations. Reports in Democratic and Republican newspapers had no effect.

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1. Introduction

As providers of information, the media provide the key infrastructure for governance and a

well-functioning polity: “the central purpose of journalism is to provide citizens with accurate

and reliable information they need to function in a free society” (Pew Research Center 2009).

Historically, the media were so important to politics that they were recognized as the “fourth

estate,” the first three estates being the clergy, nobility, and commoners (Wikipedia 2010).

Owing to their broad and possibly targeted reach, the media have become an essential vehicle

for advertising and public relations.

The ostensible function of the media is to report the news and inform their audience.

However, it is widely believed that news reports go beyond conveying information to

influencing behavior, that is, that the media do not just report the news, but also, “make” or

“define” the news (Alsem et al. 2008). The media might influence behavior through pure

exposure by selecting what to report (Gentzkow and Shapiro 2004; George and Waldfogel

2006) as well as slant and spin in what is reported (Mullainathan and Shleifer 2005;

Gentzkow and Shapiro 2006; Gentzkow et al. 2006; Xiang and Sarvary 2007).

Most empirical studies of the impact of the media on individual behavior have

focused on electoral politics, an area in which the bulk of developments, news,

opinions/views, and policies are conveyed to individuals through the media (Strömberg 2004;

Gentzkow et al. 2006). The literature has documented that the media has a strong and robust

influence on voting behavior. For example, by substituting for other media such as

newspapers and radio, television decreased voter turnout (Gentzkow 2006); the entry of Fox

News in cable markets increased voter turnout and, more importantly, Republican support in

Presidential and Senate elections (DellaVigna and Kaplan 2007); Spanish-language local

television news raised Hispanic voter turnout (Oberholzer-Gee and Waldfogel 2009); in

Washington, D.C., exposure to newspapers raised voter turnout in a gubernatorial election but

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media slant had no effect (Gerber et al. 2009); the closure of the Cincinatti Post reduced

voter turnout and campaign spending and resulted in incumbents becoming more likely to

win re-election (Schulholfer-Wohl and Garrido 2009).1

There have been relatively few studies of the impact of news reports on consumer

behavior outside of the political arena. While news reports are a primary channel of voter

information about politics, news reports are only one (arguably secondary) channel by which

information about non-political goods and services is communicated to consumers. The

major channels of communication are advertising and in-store promotions, supplemented by

“word of mouth” (Kotler and Keller 2008).

From the viewpoint of industry, the great attraction of media publicity as a way of

communicating information about goods and services is that it is, apparently, “free,” whereas

advertising and sales promotion are costly (Smith 2008). However, in 2008, U.S. public

relations expenditures on wages for managers and specialists alone totaled $19.42 billion, as

compared with wage expenditures on advertising managers of just $3.42 billion.2 Hence,

industry indeed spent considerable resources to cultivate the “free” publicity.

Given the substantial expenditures, it is imperative to assess the role of the media on

consumer behavior. However, despite the apparent attractiveness of media publicity and the

considerable expenditures, industry lacks guidance about the effectiveness of media publicity

or indeed how to measure publicity – whether in terms of number of media reports or the

content of the reports (Smith 2008). Further, while we know that media slant and bias affect

1 A separate but related literature studies how individuals demand slant in newspapers. Gentzkow and Shapiro (forthcoming) compiled an index of political slant based on phrases frequently used by Democrat vis-à-vis Republican members of Congress. They found that readers systematically preferred newspapers with slant, and newspapers responded to the readers’ preferences by tailoring their news reporting. This finding is generally consistent with a setting in which Bayesian consumers make quality inference of media based on the match of the media reports to their prior expectations (Gentzkow and Shapiro 2006), and with settings in which the media confer positive “preference externalities” (George and Waldfogel 2003, 2006). 2 Authors’ calculation based on data from the U.S. Bureau of Labor Statistics (see, also, Falconi 2006). U.S. advertising expenditure in 2008 was $141.7 billion (TNS Media Intelligence 2009).

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voting behavior, we do not know whether they affect consumer behavior in a non-political

context.

Accordingly, our research seeks to address the following questions: To what extent

do media reports affect consumer choice? How important is the content of the report as

contrasted with the report itself? Do slant and bias matter in media reports of (non-political)

goods and services?

We address these research questions in a novel context – the federal Do Not Call

(DNC) registry. The U.S. federal government established the DNC registry as a free service

to help consumers avoid telemarketing. Consumers can sign up for the DNC registry either

by telephone or through the Internet. Since its inception in June 2003, the service has been

frequently reported in many newspapers. The DNC registry was supported by both major

political parties,3 and so media slant and bias should not matter in this context. Therefore, it

provides a neat setting in which to study the impact of news reports on consumer choice.

We assembled a rich and novel data-set from multiple sources. Unlike prior studies

of media impact which focused on overall slant of the media (and so technically looked at the

media itself rather than the reporting), we focus on actual reporting. Our data-set includes all

reports of the DNC registry in 117 newspapers that were circulated in more than 2,800 U.S.

counties. We matched the registration rates and news reports with an array of newspaper and

county demographic characteristics to compile a cross-section of DNC registrations,

newspaper reports, and county characteristics. We then related DNC registrations to various

measures of newspaper reports to identify their impact in a regression model.

The key issue in the econometric estimation was to distinguish the impact of news on

DNC registration from the reverse effect, that newspapers increased reporting of the DNC

registry because of an increase in registrations. In addition to including a battery of

3 See, for example, the Congressional votes reported in the Washington Post (2010).

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demographic controls, we applied three different identification strategies. The first focused

on news reports published before the opening of the DNC registry. Clearly, these news

reports could not have been driven by consumer registrations. The next strategy applied a

difference-in-differences estimation strategy according to the extent to which the state added

telephone numbers from a state-level do not call registry to the federal registry. The

responsiveness of consumers to the federal registry would be lower in which a larger

proportion of telephone numbers were registered by the state. The third strategy applied

instrumental variables, using staff size and newsprint consumption as instruments for news

reports. Using the three approaches, we found robust evidence that newspaper reports did

increase DNC registration. The estimates implied that a one percent increase in the number

of news reports raised the number of DNC registrations by 0.02 to 0.06 percent.

The three approaches above allowed us to test the overall impact of newspaper reports

on consumer choice, and measure the “sales-response function” in our context. In addition,

we compiled various characteristics of the newspaper reports to explore the extent to which

the content of the newspaper reports affected DNC registration. We found little evidence that

the content of news reports affected DNC registration more than the report itself.

Finally, motivated by the studies of the impact of media reports on electoral politics,

we investigated the impact of media slant or bias on consumer behavior in the DNC context.

To do so, we compared the impact on DNC registration of reports in Democratic, Republican,

vis-à-vis unaffiliated newspapers, and found that only reports in unaffiliated newspapers

affected DNC registration.

2. Related literature

One of the celebrated 4Ps of marketing strategy is promotion, which comprises advertising,

publicity, and sales promotion. Marketing scholars have extensively studied advertising and

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sales promotion (see, e.g., Fornell et al. 1985; Narasimhan 1988; Sasieni 1989; Blattberg et al.

1995; van Heerde et al. 2004; Chintagunta et al. 2006; Johnson and Myatt 2006; Sigué and

Chintagunta 2009). However, there has been relatively less attention to publicity despite its

obvious importance in marketing and consumer behavior.

The limited academic research on publicity has focused on its impact on consumer

attitudes, or the impacts of specialized publicity, specifically, consumer “word of mouth,” or

the impact of publicity in the political arena. For example, through a series of laboratory

experiments, Ahluwalia et al. (2000) found that the effect of publicity on consumer attitudes

toward a product is moderated by the extent of the consumers’ commitment. They

manipulated publicity using synthetic positive and negative newspaper articles, and found

that consumers who were more committed to the product were more responsive to positive

publicity and less responsive to negative publicity.

Similarly, postings on the Yahoo Movies Web site affected box-office sales, especially

in the weeks immediately after the movie opening (Liu 2006), and consumer reviews on the

Amazon and Barnes and Noble websites affected sales of the corresponding books (Chevalier

and Mayzlin 2006). However, the “word of mouth” studies provide little guidance as to the

impact of general publicity, as distinct from targeted reviews or synthetic product reviews in

a laboratory, on consumer choices.

In the political arena, Strömberg (2004) found that media coverage may inform

consumers about elections and may in turn affect government policies. Mullainathan and

Shleifer (2004), Gentzkow et al. (2006), Gentzkow and Shapiro (2006), and Xiang and

Sarvary (2007) studied the underlying structure of the media market – why the media have

incentives to produce slanted and biased news, how competition might affect media diversity

and news quality, and whether consumers demand slanted news.4

4 For a detailed review of this literature, see Gentzkow and Shapiro (2008).

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Using micro-level data on Fox News penetration, DellaVigna and Kaplan (2007)

found that the introduction of Fox News increased Republican votes by 0.4 to 0.7 percentage

points and convinced 3 to 28 percent of its viewers to vote Republican. Similarly, in a field

experiment, Gerber et al. (2009) found that free subscriptions to either the pro-Democratic

Washington Post or the pro-Republican Washington Times increased voter turnout and

support for the Democratic candidate, suggesting that newspaper affected voter behavior

through exposure rather than slant.

At the end of 2007, a joint operating agreement between the Cincinnati Post and the

Cincinatti Enquirer expired, and the Post was closed. Schulhofer and Garrido (2009) found

that, in communities where the Post had previously provided relatively more coverage, the

closure of the Post led to fewer candidates competing, incumbents becoming more likely to

win, and lower voter turnout and campaign spending in municipal elections.

The studies of voting behavior, however, were generally founded on the overall slant

of the media. That is, they assumed that news reports would follow the political stance of the

medium, and their unit of analysis was effectively the medium rather than any particular

event or incident. While these assumptions might be appropriate in electoral politics, they

offer limited guidance on the effectiveness of the media as a publicity channel for an item

which is not obviously political.

Focusing specifically on economics news, Alsem et al. (2008) related coverage in two

Dutch newspapers to consumer and producer confidence. They applied the vector

autoregression (VAR) method and found that newspaper reports had little influence on both

consumer and producer confidence on the economy. They selected, however, only one day

of newspapers in each month, asked graduate students to rate the overall impression

presented by the newspapers on the overall economy, and used the ratings to measure

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monthly media intensity. Hence, multiple sources of measurement errors could have reduced

the statistical significance of the newspaper influence.

Kalaitzandonakes et al. (2004) conducted an empirical analysis using an approach that

is perhaps closest to our study. In the context of processed foods, they found that consumer

purchase of taco shells was significantly related to the frequency of news reports of the recall

of products contaminated with genetically-engineered corn. Similar to our study, they

constructed the media coverage variable by transcribing articles from various U.S.

newspapers. Their study, however, did not account for possible endogeneity in newspaper

reports, specifically, that the extent of media coverage might have been caused by the drop in

consumer purchases and increased public interest.5

Generally, the main challenge in studying the impact of media publicity on consumer

behavior lies in compiling the coverage and reports relevant to a particular event or incident,

and in robustly identifying the effect given the possible endogeneity of media coverage. In

our study, we address these challenges by comprehensively transcribing all newspaper reports

of the DNC registry from June 1, 2003 to June 27, 2004, and addressing possible endogeneity

through multiple demographic controls and three different identification strategies.

3. Data

The U.S. Federal Trade Commission (FTC) opened the federal DNC registry on June 27,

2003. The registry applies to both interstate and intrastate telemarketing calls. Telemarketers

are required to remove numbers on the DNC registry from their call lists every 31 days.

5 Outside of the realm of consumer choice, newspaper reports have been shown to affect stock markets. “Abreast of the Market” is a daily column in the Wall Street Journal that reviews the U.S. stock market, and particularly, the stocks comprising the Dow Jones Industrial Average (DJIA). Tetlock (2007) found that, between 1984 and 1999, the sentiment of the column affected the DJIA index as well as trading volumes. Pessimistic columns led to downward pressure on the index, while unusually high or low pessimism in the column increased market trading volume.

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Violators are subject to fines of up to $11,000 per offence. Registration for the DNC service

is free to consumers and can be completed by either telephone call or the Internet.

The FTC provided us with DNC registrations from June 27, 2003 (the beginning of

the registry) to January 6, 2006. We used the registration data up to the end of June 2004

(one year after the registry opened) as Americans tend to move during the summer (Hansen

1998), and so some of the DNC entries that were recorded after June 2004 could be “re-

registrations”.6 The FTC records showed registrations by redacted telephone number for

each area code and exchange, called NPA-NXX – e.g., (617) 363-xxxx – by date of

registration. While the U.S. comprised 3,128 counties in our data-set, it comprised 94,342

exchanges. On average, each county comprised about 47 exchanges, but there was

substantial variation in the number of exchanges per county.

To proceed, we used the North American Local Exchange NPA-NXX Database from

Quentin Sager Consulting to identify the counties served by each telephone exchange. For

telephone exchanges spanning multiple counties, we allocated the DNC registrations to the

respective counties based on the relative number of households in the counties as reported by

the U.S. Census 2000. We matched the DNC registrations to counties because we could not

identify the individuals or households who made the registrations, and so could only use their

geographical location – county – to characterize their demographic profiles. We obtained

average demographic data of county residents from the U.S. Census 2000, and matched these

data to the DNC registration data at the county level. 7

6 Further, since early 2005, several waves of phish emails targeted consumers to register their mobile phone numbers on non-existent DNC registries (and so could have deflected mobile phone numbers from the legitimate DNC registry), or falsely claimed that mobile phone numbers registered on the federal DNC registry would be subject to even more telemarketing calls (Federal Trade Commission 2005b, 2006). We were not able to identify the exact time period and geographical locations in which these malicious emails were circulated, but they could have affected DNC registration rates after 2004. 7 On reviewing the registration data, we identified an obvious discrepancy in Williamsburg, VA (FIPS 51830), which had just 3,619 households but a massive 17,127 registrations, or an average of 4.73 per household, which was 20.9 standard deviations higher than the mean registration rate of

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Using the proprietary news database, Factiva,8 we searched for newspaper reports

including the words “do not call” together with either “FTC” or “Federal Trade Commission”

within the same report between June 1, 2003 and June 27, 2004.9, 10 Our search yielded

1,262 reports in 117 newspapers. For each report, we recorded the name of the publication,

the date, and various characteristics of the report – whether it mentioned number of people

registering, e.g., “The FTC estimates some 60 million phone numbers will be registered out

of 166 million residential phone numbers in America” (New York Post, June 27, 2003),

whether the report included a toll-free number or URL, and the lengths of the headline and

main body.

Figure 1 depicts the number of reports, by day, during the period of study. There

were two significant peaks in reporting. The first coincided with the opening of the federal

DNC registry on June 27, 2003. The second was associated with decisions on September 23

and 25, 2003, by U.S. District Judges in Colorado that forced the FTC to suspend the DNC

registry, but quickly followed by Congressional legislation to ratify the FTC’s authority and

allowing the DNC registry to resume on October 1, 2003 (Federal Communications Commission

2004). Both peaks in reporting are consistent with news reports of the DNC registry being

the result of particular events and exogenous to DNC registration.

<<Insert Figure 1 here>>

0.396 per household. The county with the next highest registration was Pitkin, CO (FIPS 8097) with just 1.62 per household. Accordingly, we omitted Williamsburg, VA from our analyses. 8 Factiva is a comprehensive newspaper database provided by Dow Jones. For more details of this database, see http://factiva.com/. 9 We required either “FTC” or “Federal Trade Commission” as well as “do not call” to screen out reports unrelated to the federal DNC registry. 10 Newspaper reports were collected from June 1, 2003, about a month before the opening of the DNC registry on June 27, 2003. We collected newspaper reports before the commencement of DNC registration so that we could capture the extensive media attention and buzz preceding the launch of the DNC registry. The ending time periods of registration data and newspaper reports were specified to be the same, i.e., the end of June 2004.

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The impact of a newspaper report in a particular county would depend on the

circulation of the newspaper in that county. From the Audit Bureau of Circulation (ABC),

we obtained the circulation of each newspaper by county and day of week. We then

calculated the intensity of newspapers reports of DNC in county i as

( )i j ijj

I R c , (1)

where Rj is the number of reports of DNC in newspaper j, and cij is the circulation of

newspaper j in county i. Effectively, iI measures the total number of copies of DNC

newspaper reports circulated in county i during the studied period.11

We further compiled other newspaper characteristics from various sources to

supplement the news report data. From the Editor & Publisher International Year Book,

2004, we obtained annual newsprint consumption. From Bacon’s Newspaper Directory,

2005, we procured the total number of employees at each newspaper. From Web sites that

document newspaper politics,12 we extracted newspaper endorsements, if any, of candidates

in the 2004 U.S. presidential election.

Finally, we obtained the percent support, in each county, for the Republican candidate,

George W. Bush, and the Democratic candidate, John Kerry, in the 2004 U.S. presidential

election from Atlas of U.S. Presidential Elections.13

Prior to the opening of the federal DNC registry in June 2003, 27 states had already

established state-level “do not call” registries at various times ranging from November 1996

(Alaska) to April 2003 (California) (Varian et al. 2004). Subsequently, some states added the

telephone numbers on their state registry to the federal registry (Federal Trade Commission

2005a). In one set of analyses, we applied a difference-in-differences strategy, exploiting

11 The measure, Ii, is similar to the concept of “gross rating points”. 12 See, for example, http://www.dkosopedia.com/wiki/2004_Media_Endorsements, http://www.gwu.edu/ ~action/2004/cands/natendorse5.html [accessed January 25, 2010]. 13 See http://www.uselectionatlas.org/ [accessed January 25, 2010].

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differences in the response of DNC registration to news reports according to the extent to

which telephone numbers on the state registry were added to the federal registry.

We compiled the percentage of state-registered numbers added to the federal registry

from an FTC (2003) report. However, the FTC report was incomplete in that it did not cover

all states that added their state registries to the federal DNC registry. For instance, it

excluded Pennsylvania, which subsequently added its state-registered telephone numbers to

the federal registry. Accordingly, we limited the difference-in-differences estimates to those

states without a prior state registry or those with a state registry covered by the FTC report.

Tables 1 and 2 present summary statistics and correlations of the data. Our data-set,

including characteristics of the newspapers and newspaper reports, demographics, and 2004

presidential election information, was specified at the county level.14

<<Insert Tables 1 and 2 here>>

4. Model

The basic model for analysis is a cross-sectional county-level regression of the form:

ik

kikii XIQ lnlnln , (2)

where iQ is the number of DNC registrations in county i, iI , as defined in (1) above, is the

number of DNC newspaper reports weighted by circulation in county i, kiX represents

demographic characteristics of the county, and i captures any county-level random errors.

We used a cross-sectional specification because most of our variables in the data-set,

14 We selected the county as the unit of analysis for two reasons. First, we could associate each registration with a county but not any individual newspaper or newspaper report. Second, a registration may be influenced by multiple newspaper reports (e.g., people read one newspaper at home and another at the workplace (Gentzkow and Shapiro 2008)), and so measurement errors would arise if we associated each DNC registration to a single newspaper report.

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particularly the newspaper characteristics that we used as instrumental variables for DNC

news reports, did not vary across time. We specified all continuous variables in logarithms.15

In one identification strategy, we applied difference-in-differences among counties

according to the extent to which telephone numbers registered with a state-level DNC

registry were added to the federal registry. Referring to (2), suppose that

0 1 iS , (3)

where iS is the percentage of registrations added from the state registry (number of DNC

registrations added from state registry divided by total number of DNC registrations).

Substituting in (2), we have

ik

kikiiii XISIQ lnlnlnln 10 . (4)

Our hypothesis was that 1 0 , since the impact of newspaper reports should be smaller to

the extent that the state added state-registered telephone numbers to the federal registry.

5. Results

Telemarketing and consumer privacy are regulated by federal and state governments but not

county governments. Accordingly, to control for any possible regulations at the state level,

we included state fixed effects in all subsequent estimations and estimated standard errors

using the Huber-White adjustment, clustered by state. With the inclusion of state fixed

effects and robust clustered standard errors, our analysis focused on explaining differences in

registrations from state-wide averages.

15 Where necessary, we added one to the variable before applying the logarithms to avoid logarithms of zeroes. The double-log specification allowed us to directly interpret the estimated coefficients as elasticities. Moreover, empirical analyses of economic variables often fit better with the variables specified in logarithm (Wooldridge 2006: 197-200). Also, we included the number of households (in logarithm) as an explanatory variable, and so the dependent variable in (2) was equivalent to the county-level registration rate.

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We first estimated an ordinary least squares (OLS) regression of DNC registrations on

various demographic factors that have been previously identified as affecting DNC

registrations. These covariates were the number of households, household size and income,

commuting time, unemployment rate and retail density (Varian et al. 2004; Goh et al. 2009).

As reported in Table 1, column (i), the results were generally consistent with previous

findings.16

<<Insert Table 3 here>>

We next estimated (2), as a baseline model of the impact of the number of news

reports (weighted by circulation), iI , on DNC registrations over the entire period of study.

As reported in Table 3, column (ii), the estimated coefficient of the number of news reports,

0.021 (±0.007), was positive and statistically significant. As the dependent variable (DNC

registrations) and the number of news reports were specified in logarithms, the coefficient

was the estimated elasticity. Accordingly, a one percent increase in newspaper reports of the

DNC registry, weighted by circulation in a county, was associated with a 0.021 percent

increase in DNC registrations in the county. To set the estimated elasticity in context, it was

about one-fifth of the average short-term advertising elasticity, 0.109, as reported in a meta-

analysis (Sethuraman and Tellis 1991). Our result suggests that the estimated impact of

newspaper reports is substantially smaller than that of advertising.

An obvious concern with this baseline analysis is that, although we included various

demographic controls, the results might be explained by reverse causation or some omitted

variables. While the news reports could have increased DNC registrations, it is also possible

16 The number of registrations should increase with number of households in the county. The likelihood that a person would pick up a telemarketing call would be lower in a larger household, and so large households may have a lower demand for DNC. High income or employed people may incur a higher time cost in receiving telemarketing calls, and so income may positively and unemployment may negatively correlate with DNC registrations. Finally, retail density may reflect the demand for shopping, and so in regions that have relatively more retail shops, the consumer demand for DNC may also be lower because they are more receptive of telemarketing.

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that the newspapers were spurred by the overwhelming response to the opening of the DNC

registry to report the event. Also, some unobserved factors or incidents, such as adjustments

of telemarketing practices following the opening of the federal DNC registry, could affect

both registration and news reports contemporaneously. To rule out reverse causation and

omitted variables, we applied three different identification strategies.

5.1 Newspaper reports: Day 1

First, we focused on news reports published between June 1-26, 2003, and sign-ups with the

DNC registry on the opening day, June 27, 2003. Clearly, news reports published before

June 27 could not have been influenced by registrations on June 27. The sample size was

much smaller than in the estimate over the full period of study. The reason is that, as Figure

1 shows, news reporting was very subdued until the launch of the federal DNC registry.

Table 3, column (iii), reports the estimates. The coefficient of news reports, 0.061

(±0.024), was positive and statistically significant. Importantly, the elasticity, 0.061 (±0.024),

was substantially larger than the elasticity, 0.021 (±0.007), as estimated using news reports

and DNC registrations over the entire period of study. This difference is expected for two

reasons. First, the pre-launch news reports would have built up a pent-up demand for the

DNC registry when it opened. Second, the people who registered early would be those with

the strongest preference for the DNC registry, leaving those with weaker preference (and less

sensitive to news reports) to register later.

5.2 Newspaper reports: Difference-in-differences

Next, we applied a difference-in-differences strategy, exploiting differences between counties

according to the extent to which telephone numbers on the state-level DNC registry were

added to the federal registry. As a preliminary, we compared newspaper coverage in counties

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with and without state-level registries. As reported in Table 4, among counties with state-

level registries, the mean number of news reports (weighted by circulation) was 135.18

(181.83), while, among counties without state-level registries, the mean was 231.46

(419.17). Apparently, newspapers did tend to provide more coverage of the federal DNC

registry where a corresponding state-level registry did not exist.

<<Insert Table 4 here>>

Table 3, column (iv), reports the estimate of model (4).17 The coefficients of the

various demographic controls were similar to those in the regression of model (1) (Table 3,

column (ii)). The coefficient of news reports, 0.023 (±0.011), was positive and significant,

and slightly larger than the estimate in model (1).

Importantly, the coefficient of the interaction between the number of news reports and

the percentage of numbers added by the state, -0.044 (±0.018), was positive and significant.

This was consistent with the hypothesis that 1 0 , i.e., to the extent that consumers had

their telephone numbers registered through the state registry, they would be less responsive to

news reports of the federal DNC registry. Based on the average state addition of 42.7%, the

elasticity of DNC registration with respect to news reports in a county with the average

registration through a state registry was 0.023 – 0.044 x 0.427 = 0.004, or about one-fifth of

the elasticity in a county with no state registry.

5.3 Newspaper reports: Instrumental variables

Our third identification strategy was to estimate the structural impact of newspaper reports on

DNC registrations using instrumental variable (IV) regressions. The ideal IVs in this context

would be factors that shifted newspapers’ reporting of DNC, but not DNC registration itself.

17 We continued to use the Huber-White robust sandwich estimator for the standard errors, clustered by state, to account for possible within-state correlations, as recommended by Bertrand et al. (2004) for difference-in-differences tests.

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One plausible instrument for the number of news reports of DNC registration was the

staff size of the newspaper. A newspaper with a larger staff would be likely to employ more

journalists and reporters, and so produce more content, including reports of DNC registration.

However, it is unlikely that the setting up of the federal DNC registry, which is not a major,

sustained issue, would materially affect the staff size of a newspaper.

Another plausible instrument was the annual newsprint consumption of the newspaper,

adjusted by the newspaper’s circulation.18 A newspaper that consumed more newsprint,

relative to circulation, would have room for more news reports, including reports of DNC

registration. However, it is unlikely that the establishment of the federal DNC registry would

affect annual newsprint consumption.19

We performed the IV estimation using two-stage least squares (2SLS). Table 3,

column (v), reports the results with staff size as the instrument. The sample size was reduced

as we could not find information about the staff size of all newspapers. The coefficient of the

(logarithm of the) number of news reports, 0.023 (±0.007), was positive and significant.

Table 3, column (vi), reports the results with newsprint consumption as the instrument. The

coefficient of the number of news reports, 0.017 (±0.008), was positive and significant.

The estimated elasticities by 2SLS – 0.023 (±0.007) and 0.017 (±0.008) – were close

to the basic OLS estimate of 0.021 (±0.007). However, we should caution that the statistical

evidence of endogeneity was mixed. In a Hausman test, the residuals from the first-stage

regressions with staff size as the instrument were not significant (p = 0.901). Assuming that

news reports were endogenous, the staff size seemed to be a reasonably good instrument.

The Wald statistic was 1444, which well exceeded the rule-of-thumb of 10 (Stock and Yogo

18 The quantity of newsprint consumed already reflects total circulation, and so we weighted newsprint by normalized circulation in the respective counties. 19 The use of staff size and newsprint consumption as IVs is analogous to using supply-side cost shifters as IVs to estimate structural demand parameters. Supply-side cost shifters are appropriate instruments in empirical demand estimations (Berry 1994; Besanko et al. 1998).

18

2005). With newsprint consumption as the instrument, the Hausman test of the residuals

from the first-stage regressions was not significant (p = 0.248), while the Wald statistic was

492.09.

Upon considering the various specifications and diagnostics, we preferred the basic

model, (2), estimated by OLS over the whole period, as reported in Table 3, column (ii). This

specification was parsimonious, was easy to interpret, and provided an estimate of the

elasticity of DNC registration with respect to news reports, 0.021 (±0.07), which was

relatively conservative. The preferred specification was buttressed by estimates using three

identification strategies.

5.4 Content

Having established the impact of newspaper reports on DNC registration, a further issue was

the impact of the specific content of the news reports. To explore this question, we extracted

various characteristics of the newspaper reports – whether the report included a toll-free

number or URL, or mentioned the number of people registering, and the length of the

headline and main text.

It is important to note that content was conditional on the occurrence of a news report.

Only if a newspaper published a report on the DNC registry could it include the toll-free

number, URL, etc. Hence, as is evident from Table 2, the number of news reports and

content variables were highly collinear (all correlations exceeded 0.90). Accordingly, given

the limited sample size, it was infeasible to include both the number of news reports and the

measure of content in a single regression.

<<Insert Table 5 here>>

Hence, we separately estimated the impacts of the various measures of content on

DNC registration. As reported in Table 5, the results were very similar for the various

19

measures. The estimated elasticities with respect to news reports, inclusion of toll-free

number or URL, and mention of the number of registrations were very close, ranging from

0.024 ( 0.007) to 0.027( 0.009), as compared with 0.021 (± 0.007) for the number of news

reports. The estimated elasticities with respect to the length of the headline and main text

were not much different.

To gain deeper insight into the impact of the news contents, in the next set of analyses,

we partitioned the newspaper reports according to whether they did or did not include a

specific type of content – toll-free number, URL, or number of people registering. Using the

preferred specification but limiting the measure of news reports to those that did or did not

include the particular content, we then estimated the impact of news reports on DNC

registrations. We were not able to enter more than one measure of content simultaneously

because of high multicollinearity.

<<Insert Table 6 here>>

As reported in Table 6, in general, the results were similar to those from the previous

analyses. Apparently, there was little difference in the impact of news reports that did or did

not mention the toll-free number, URL, or the number of people registering.

Taken together, the results in Tables 5 and 6 suggest that the various dimensions of

the content of news reports had roughly similar impact on DNC registration as the fact of the

report itself. There being no difference in the impact of reports that did or did not mention

the number of people registering suggests that the impact of news reports lay in exposure

rather than influence.

However, we must caution that our news report and content variables were highly

collinear, and so the above inferences were drawn based on separate estimation of their

impacts. Integrating multiple measures of news content into a single nested estimation, with

the measures of content being conditional on the report, would be a good direction for future

20

research. This would provide more precise results on the issue of whether newspapers affect

behavior through exposure or influence.

5.5 Politics

Given that newspaper reports had a robust influence on DNC registration, and in light of

previous studies of the impact of newspapers on electoral politics, our final question was

whether the politics of the newspaper had any impact on consumer registration. To address

this question, we classified newspapers according to whether they endorsed the Republican,

Democratic, or neither of the major-party candidates in the 2004 presidential election. We

were able to identify the endorsements among 98 newspapers (or 84% of newspapers covered

in our analysis), of which 35 endorsed the Republican candidate, 44 the Democratic

candidate, and 5 neither major-party candidate.

Then, we re-constructed the newspaper report variables as

j

pij

pj

pi cRI )( , (5)

where p = Democratic, Republican, or Neutral. The model that we estimated was then

ik

kikNiN

RR

DiDi XIIIQ

i lnlnlnlnln . (6)

If the politics of the newspaper had no impact on consumer registration with the federal DNC

registry, then NRD . If, however, RD , NR , or DN , then newspapers of

different political slant had differential impacts on consumer registrations.

Table 1 reports summary statistics of the number of news reports from Republican,

Democratic, and neutral newspapers. Table 7 reports descriptive statistics of the content of

the newspaper reports by the politics of the newspaper. Neutral newspapers published more

reports about the DNC registry than Republican newspapers, which in turn, published more

reports than Democratic papers, but the differences were not statistically significant. Based

21

on the various measures of content, there seemed to be no statistically significant difference

in the content of reports in newspapers by political affiliation.

<<Insert Table 7 here>>

With regard to model (6), in the first estimate, we included the number of reports of

the federal DNC registry in Republican newspapers, the Republican vote, and the interaction

of the two political variables. As reported in Table 8, column (i), news reports in Republican

papers had no significant effect on DNC registrations, but Republican voters were more

likely to register for DNC. The effect of Republican voting preference was robust – it

continued to be significant in the full specification including reports in newspapers of all

political affiliations. This factor in DNC registration was not noticed in previous

demographic studies (Varian et al. 2004; Goh et al. 2009).

As reported in Table 8, column (ii), news reports in Democratic papers had no

significant effect on DNC registrations, while Democratic voters were less likely to register

for DNC (the latter effect, however, was not robust to the inclusion of reports in newspapers

of all political affiliations).

<<Insert Table 8 here>>

As reported in Table 8, column (iii), news reports in neutral newspapers (those that

endorsed neither major party candidate in the 2004 Presidential election) had a significant

and positive effect on DNC registration. The estimated elasticity, 0.020 (±0.008), was almost

identical to that in the basic regression, 0.021 (±0.007) (Table 3, column (ii)). This result was

similar to that in the full specification, including reports in newspapers of all political

affiliations (Table 8, column (iv)). However, the estimated elasticity of DNC registration

with respect to the number of reports in neutral newspapers was somewhat smaller, 0.016 (±

0.009), and statistically less significant.

22

Taken together, the results in Table 8 imply that in the context of DNC registrations,

the political bias of newspapers mattered – only reports in neutral newspapers had a

significant impact on DNC registrations. It is striking that we found such a difference in

DNC registrations, which was apparently a non-political issue that was supported by both

major parties (see, for instance, the Congressional votes reported in the Washington Post

2010). However, we should caution that our sample included only five neutral newspapers.

An obvious explanation would be that news reporting differed between newspapers

according to political affiliation. However, as reported in Table 7, there seemed to be no

(statistically significant) objective differences in coverage or content. Another possibility is

that neutral newspapers gave more prominent or more favorable coverage to the DNC

registry than Republican or Democratic newspapers. For instance, neutral newspapers might

have placed reports of the DNC registry on the front page as compared with an inside page.

Or, neutral newspapers might have reported about the DNC registry with a more pro-

government or pro-consumer slant.

In future research, it would be interesting to investigate whether neutral newspapers

report about commercial and government services with systematically different prominence

and slant as compared with Republican or Democratic newspapers. The findings would have

obvious implications for public policy and managerial practice.

6. Implications

Through a series of structural estimations exploiting information from multiple sources on

newspaper and county characteristics, we found robust evidence that newspaper reports of the

federal DNC registry affected consumer behavior. Our results suggest guidance on the

magnitude of the consumer response to newspaper publicity (i.e., the sales-response function).

While we found that newspaper reports had a significant economic impact, we must caution

23

that DNC registration was free of charge. Consumers would have been more responsive to

publicity about the DNC registry than to publicity about a commercially-provided item that

must be paid for. Intuitively, we expect the demand for commercial items to be less sensitive

to newspaper publicity, and we interpret our results to provide an upper bound to the sales-

response function.

An immediate avenue for further research would be to estimate the sales-response

functions for the various consumer products with respect to the various media. Using the

incremental margin (price less marginal cost), it would be straightforward to adapt the

Dorfman-Steiner condition to calculate the profit maximizing level of publicity expenditure

(Png and Lehman 2007: 208-211). Such analyses would shed light on whether the U.S.

expenditure of more than $19.42 billion per year on publicity exceeds or falls below the

profit-maximizing level.

Government regulation of media and particularly policy to ensure diversity of media

is typically justified by the need to ensure that the public has good information and so can

make well-informed choices (Gentzkow and Shapiro 2008). In an apparently non-political

context, we have found that the political neutrality of newspapers matters for consumer

choice. To the extent that our finding generalizes to commercially-provided goods and

services, it is important that there be sufficient circulation of neutral media so that consumers

would be well-informed. Our implication contrasts somewhat with political economy

research, the findings of which point public policy towards media diversity. Our results

suggest that increasing media diversity, if this means increasing the number of politically

affiliated media, would not affect consumer behavior.

For managers, our findings suggest that they must attend to the political bias of media

in directing their public relations effort. Instead of merely considering the reach (number of

impressions) and demographics of readership, marketing managers must also attend to the

24

politics of the media, and how the political orientation of the media interact with consumer

preferences. For example, our results show that only politically neutral newspapers affected

consumer decisions. To the extent that this generalizes to other goods and services,

marketing managers would achieve greater impact by focusing their publicity efforts at such

newspapers.

7. Limitations

This study is subject to several limitations. First, as we highlighted in Section 5.4, more data

are needed to overcome multicollinearity so as to distinguish the impact due to the various

dimensions of newspaper content. Second, our Factiva search yielded reports in only 117 of

1,197 U.S. newspapers audited by the Audit Bureau of Circulations. To the extent that

reports in various newspapers are correlated and these are correlated with reports in television

and other media – for example, through their publication of the same wire service reports –

our estimates might have exaggerated the effect of news reports on consumer registrations.

Third, the impact of newspaper reports could be more precisely estimated if we had

observations of consumer behavior at the level of individual newspapers. The challenge is

that it is difficult to observe the characteristics of those who registered for DNC, and to

associate each newspaper report with a particular individual/household.

Fourth, we did not have any data on newspaper readership other than circulation. If

the news reports exerted impact through self-selection of readership with characteristics

different from the overall county demographics, then our estimates could have been biased.

It would be helpful to control for such unmeasured heterogeneity among the studied counties

and newspapers, perhaps by augmenting the data-set with readership information.

8. Conclusions

25

Using observations of federal DNC registrations and comprehensive information on

newspaper reports and other data that we compiled from multiple sources, we found robust

evidence that newspaper reports significantly affected DNC registrations. Our estimate of

0.021 (±0.007) for the elasticity of the demand for DNC registration with respect to

newspaper reports established an upper bound for the sales-response function with respect to

media publicity. Further, we found that the political neutrality of newspapers mattered for

the impact of newspaper reports on DNC registration.

This study reveals that an important marketing function – media publicity – interacts

with politics. Even for an apparently non-political service, the impact of news reports

depended on the political neutrality of the media. This suggests that, for public policy, media

neutrality may be important for consumers to be well-informed even about apparently non-

political matters, and that media diversity as such may not necessarily help consumers. A

business implication is that managers should pay close attention to the political slant of any

media used as publicity channels.

In future research, it would be interesting to investigate whether media of different

political affiliation report about commercial and government services with systematically

different prominence and slant. The findings would have obvious implications for public

policy and managerial practice.

Another interesting extension to this research is to study newspapers that had changed

their political affiliations between the 2000, 2004, and 2008 presidential elections. Our

conclusions would be strengthened if the impact due to the news reports changed according

to the changing political affiliations of the newspapers. Also, future research into advertising

could study the impact of political affiliation of media on the sales-response to advertising.

Does the effectiveness of advertising also vary with the political bias of the media? This is

26

an obviously important question in marketing scholarship and an important direction for

future research.

27

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