Abstract
This paper developed an economic model to explain the repeat-purchase contract enforcement role of business news. This model argues that various kinds of business news play different roles in consumers’ perceptions about a firm’s performance in quality production. Media coverage regarding product quality is used by consumers in pre-purchase inspection to differentiate firms’ qualities, while media coverage regarding social responsibility signalizes the existence of price premium. It concludes that the firms with good media reputations have more incentives and likelihood to provide high-quality products than the firms with bad media reputations.
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