Strategic Thinking on The Newsroom

On Season 1, Episode 9 of The Newsroom, Will McAvoy pitches a new structure for a potential Republican primary debate hosted by cable news channel ACN. Rather than asking questions and letting candidates speak freely, Will wants the ability to interrupt any time a candidate goes off topic or drifts away from the question. Predictably, the Republican National Committee hates the idea and doesn’t give the network a debate.

Maggie’s recap of the day’s events clearly show where the crew went wrong:




It was exactly as crazy as it sounded. Maggie is applying non-strategic thinking to a situation where there is clear strategic interdependence. Each network can choose what to offer the RNC, and the RNC can pick the terms most favorable to it. This gives each network an incentive to undercut the other until no one is willing to undercut any further. Standard bargaining theory tells us that basically all of the surplus will go to the RNC under these conditions.

But there is another facet of the interaction here that extends past basic bargaining theory. In standard price negotiations, if I don’t ultimately buy the good, I don’t care at all what you paid. That is not the case here. The lower the “price” a network is willing to offer, the more all the non-winners suffer—i.e., if CNN captured the debate by conceding the farm, journalists at CBS News, NBC News, and ACN are all worse off than had CNN captured the debate without compromising its integrity. So what we have here is essentially a collective action problem, which is just a prisoner’s dilemma with more than two players. Everyone is worse off in equilibrium than had all players agreed to cooperate, but individual incentives mandate that all parties defect.

There is some irony here. Earlier, the news team reduced Sloan Sabbath’s airtime to run stories on the Casey Anthony trial. They needed to do this to improve ratings to make them an attractive host for the debate. But Sloan Sabbath has an economics PhD from Duke and is generally frustrated that no one around her understands basic economics and aren’t really willing to spend any time to learn. The one person who could have saved them from the situation was ignored! (Or maybe she never spoke up as a perverse way of getting her revenge…)

TL;DR: McAvoy et al do not know how the prisoner’s dilemma works.