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Time Scarcity and the Market for News

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  • Larbi Alaoui
  • Fabrizio Germano

Abstract

We develop a general theory of news media. News consumers are time constrained and perform a (possibly subconscious) optimal search, given the amount of time they possess. Their utility functions are general and allow for complementarities over the amount of information they acquire on any given topic. Media outlets are aware of consumers' preferences and constraints, and aim to maximize readership. These outlets observe the news items of the day and decide on a ranking to provide to readers. They cannot falsify or misreport news. In the baseline model readers and outlets are unbiased and fully rational. We then derive basic properties of equilibria on these markets for news. In particular, equilibrium rankings need not be reader-efficient. Even in competitive markets, readers may read more than they would like to; they may read stories distinct from the ones they prefer and on topics that are different from the ones they consider to be important. Next, we derive implications on diverse aspects of new and traditional media. These include a rationale for tabloid news based on complementarities in preferences, a rationale for why readers switch to certain online media platforms as a way to circumvent inefficient rankings found in traditional media, and the derivation of a positive role for public media in restoring reader-efficient standards. Finally, we relate some of our findings to recent stylized facts, and brie y discuss political economy implications of the model.

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Bibliographic Info

Paper provided by Barcelona Graduate School of Economics in its series Working Papers with number 675.

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Date of creation: Dec 2012
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Handle: RePEc:bge:wpaper:675

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Related research

Keywords: media economics; media competition; information search; time preference; news ranking; digital media; internet; new and traditional media; public media; tabloid news; media bias;

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  1. Ricardo Reis, 2004. "Inattentive Consumers," NBER Working Papers 10883, National Bureau of Economic Research, Inc.
  2. Matthew Gentzkow & Jesse M. Shapiro, 2008. "Competition and Truth in the Market for News," Journal of Economic Perspectives, American Economic Association, vol. 22(2), pages 133-154, Spring.
  3. Fabrizio Germano & Martin Meier, 2010. "Concentration and self-censorship in commercial media," Discussion Papers 1518, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  4. Lisa George & Joel Waldfogel, 2003. "Who Affects Whom in Daily Newspaper Markets?," Journal of Political Economy, University of Chicago Press, vol. 111(4), pages 765-784, August.
  5. Van Zandt, Timothy, 2001. "Information Overload in a Network of Targeted Communication," CEPR Discussion Papers 2836, C.E.P.R. Discussion Papers.
  6. Matthew Ellman & Fabrizio Germano, 2009. "What do the Papers Sell? A Model of Advertising and Media Bias," Economic Journal, Royal Economic Society, vol. 119(537), pages 680-704, 04.
  7. Simon P. Anderson, 2005. "Market Provision of Broadcasting: A Welfare Analysis," Review of Economic Studies, Wiley Blackwell, vol. 72(4), pages 947-972, October.
  8. Lesley Chiou & Catherine Tucker, 2011. "How Does Content Aggregation Affect Users' Search for Information?," Working Papers 11-18, NET Institute, revised Oct 2011.
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