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Information or Opinion? Media Bias as Product Differentiation

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  • Bharat Anand
  • Rafael Di Tella
  • Alexander Galetovic

Abstract

Two aspects of media bias are important empirically. First, bias is persistent: it does not seem to disappear even when the media is under scrutiny. Second, bias is conflicting: different people often perceive bias in the same media outlet to be of opposite signs. We build a model in which both empirical characteristics of bias are observed in equilibrium. The key assumptions are that the information contained in the facts about a news event may not always be fully verifiable, and consumers have heterogeneous prior views (“ideologies”) about the news event. Based on these ingredients of the model, we build a location model with entry to characterize firms' reports in equilibrium, and the nature of bias. When a news item comprises only fully verifiable facts, firms report these as such, so that there is no bias and the market looks like any market for information. When a news item comprises information that is mostly nonverifiable, however, then consumers may care both about opinion and editorials, and a firm's report will contain both these aspects—in which case the market resembles any differentiated product market. Thus, the appearance of bias is a result of equilibrium product differentiation when some facts are nonverifiable. We use the model to address several questions, including the impact of competition on bias, the incentives to report unpopular news, and the impact of owner ideology on bias. In general, competition does not lead to a reduction in bias unless this is accompanied by an increase in verifiability or a smaller dispersion of prior beliefs.

Suggested Citation

  • Bharat Anand & Rafael Di Tella & Alexander Galetovic, 2007. "Information or Opinion? Media Bias as Product Differentiation," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 16(3), pages 635-682, September.
  • Handle: RePEc:bla:jemstr:v:16:y:2007:i:3:p:635-682
    DOI: 10.1111/j.1530-9134.2007.00153.x
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    2. Sobbrio, Francesco, 2014. "Citizen-editors' endogenous information acquisition and news accuracy," Journal of Public Economics, Elsevier, vol. 113(C), pages 43-53.
    3. Ascensión Andina-Díaz & José A. García-Martínez & Antonio Parravano, 2019. "The market for scoops: a dynamic approach," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 10(2), pages 175-206, June.
    4. Cagé, Julia, 2020. "Media competition, information provision and political participation: Evidence from French local newspapers and elections, 1944–2014," Journal of Public Economics, Elsevier, vol. 185(C).
    5. Garz, Marcel & Sörensen, Jil & Stone, Daniel F., 2020. "Partisan selective engagement: Evidence from Facebook," Journal of Economic Behavior & Organization, Elsevier, vol. 177(C), pages 91-108.
    6. Julia Cagé, 2014. "Media Competition, Information Provision and Political Participation," SciencePo Working papers hal-03602440, HAL.
    7. repec:hal:spmain:info:hdl:2441/16juu6v6rg8rq8nl0u1grb4jm6 is not listed on IDEAS
    8. Marcel Garz & Jonna Rickardsson, 2023. "Ownership and media slant: Evidence from Swedish newspapers," Kyklos, Wiley Blackwell, vol. 76(1), pages 18-40, February.
    9. repec:hal:spmain:info:hdl:2441/478a1feno18otpdr60lclo4fuq is not listed on IDEAS
    10. Daniel M. Olson & David M. Waguespack, 2020. "Strategic behavior by market intermediaries," Strategic Management Journal, Wiley Blackwell, vol. 41(13), pages 2474-2492, December.
    11. Garcia Pires Armando J., 2020. "Content Provision in the Media Market with Single-Homing and Multi-Homing Consumers," Review of Network Economics, De Gruyter, vol. 19(1), pages 43-83, March.
    12. Jimmy Chan & Daniel Stone, 2013. "Media proliferation and partisan selective exposure," Public Choice, Springer, vol. 156(3), pages 467-490, September.
    13. Julia Cage, 2017. "Media Competition, Information Provision and Political Participation: Evidence from French Local Newspapers and Elections, 1944-2014," SciencePo Working papers hal-03393164, HAL.
    14. Rafael Di Tella & Ignacio Franceschelli, 2011. "Government Advertising and Media Coverage of Corruption Scandals," American Economic Journal: Applied Economics, American Economic Association, vol. 3(4), pages 119-151, October.
    15. Julia Cage, 2017. "Media Competition, Information Provision and Political Participation: Evidence from French Local Newspapers and Elections, 1944-2014," SciencePo Working papers Main hal-03393164, HAL.
    16. García-Uribe, Sandra, 2022. "Multidimensional media slant: Complementarities in news reporting by US newspapers," Information Economics and Policy, Elsevier, vol. 61(C).
    17. Cagé, Julia, 2017. "Media Competition, Information Provision and Political Participation: Evidence from French Local Newspapers and Elections, 1944," CEPR Discussion Papers 12198, C.E.P.R. Discussion Papers.
    18. Sendhil Mullainathan & Andrei Shleifer, 2005. "The Market for News," American Economic Review, American Economic Association, vol. 95(4), pages 1031-1053, September.
    19. Matthias Heinz & Johan Swinnen, 2013. "Media Bias in Economic News: A Factor 20," LICOS Discussion Papers 33013, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
    20. Julia Cagé, 2014. "Media Competition, Information Provision and Political Participation," SciencePo Working papers Main hal-03602440, HAL.
    21. Julia Cagé & Moritz Hengel & Nicolas Hervé & Camille Urvoy, 2022. "Hosting Media Bias: Evidence from the Universe of French Broadcasts, 2002-2020," SciencePo Working papers Main hal-03878119, HAL.
    22. Johan F.M. Swinnen & Thijs Vandemoortele & Mara Squicciarini, 2010. "The Market for Policy Communication," LICOS Discussion Papers 27210, LICOS - Centre for Institutions and Economic Performance, KU Leuven.

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