FIGURE 5

The "Insurance Effect." If investigation costs exceed C' the newspaper only investigates stories that require a true signal to be published. Thus, the newspaper only publishes stories without investigation, or that have been signaled to be true. The boundary p _n" separates those actions. However, if the cost is below C', it will investigate stories that it is certain to publish, between p _n-lb and p _n. Since stories with probabilities above p _n" are published without investigation, the newspaper investigates in the region between p _n" and p _n only to gain liability protection.