Henry McMillan

Media, Political Pressure, and the Firm: The Case of Petroleum Pricing in the Late 1970s

This paper empirically examines whether major domestic oil companies held down product prices relative to their less visible counterparts during the 1979 oil crisis. We compare company prices on unregulated fuel oil with a measure of political pressure—the level of television coverage of the energy crisis. We find that media coverage influenced home heating oil price ratios, but did not influence residual fuel oil price ratios for the same companies. We argue that this differential pricing pattern is rational in a politically sensitive period.

Amend the old or address the new: Broad-based legislation when proposing policies is costly

If each legislator wishes to encourage other legislators to address new problems in future periods, then a subgame perfect Nash equilibrium can exist with the following properties: (1) no legislator finds it worthwhile to make a narrow proposal that appeals to a minimum majority; (2) instead, legislators propose policies that appeal to all members, not for fear of retaliation, but rather to encourage other members to work on new problems in succeeding periods; (3) in succeeding periods no legislator amends the existing broad policy. We find an equilibrium with these properties in finite as well as infinite period games.

Optimal coalition size when making proposals is costly

Though some costs of proposing legislation are borne by individual congressmen, the benefits accrue to many. To encourage legislators to incur these costs, members may wish to form coalitions which are larger than a minimum majority, and they may want to allow the proposer of a policy to incorporate private benefits into his proposal.

Regulation via Threats: Politics, Media Coverage, and Oil Pricing Decisions

Using the oil crisis of the late 1970s as a case study, we examine the intertwined influences of public opinion and media attention on the credibility of regulatory threats. We focus on three factors: the intensity of public demands for regulatory intervention, the extent to which there are other competing de- mands on legislative attention, and the availability of scapegoats external to the industry. We use television news coverage of various topics to measure these three factors. We hypothesize that firms threatened with potential regulation restrained price increases, with the largest and most publicly visible firms exercis- ing the greatest restraint. We find that large, visible oil firms restrained price increases for the most important decontrolled products (diesel fuel oil) when media coverage of the oil industry was extensive. These firms exercised less restraint when the gov- ernment was busy with other issues or when political instability in the Middle East offered an external rationale for oil price in- creases.