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Persuasion with Correlation Neglect: Media Power via Correlation of News Content

Author

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  • Levy, Gilat
  • Moreno de Barreda, Inés
  • Razin, Ronny

Abstract

We model the power of media owners to bias readers' opinions. In particular we consider readers that have "correlation neglect", i.e., fail to understand that content across news outlets might be correlated. We study how a media owner who controls several outlets can take advantage of the readers' neglect. Specifically, we show that the owner can manipulate readers' beliefs even when readers understand the informativeness of news outlet by outlet. The optimal strategy of the owner is to negatively correlate good news and positively correlate bad news. The owner's power is increasing in the number of outlets she owns but is constrained by the limited attention of readers. Importantly, our analysis suggests several new insights about welfare in media markets. First, measures of media bias have to take into account the correlation between news outlets. Second, media-market competition curbs the ability of owners to bias readers' beliefs. In particular, we show that readers always benefit from breaking media conglomerates, even when all the new media owners share the same bias. Finally, we highlight a potential cost of media diversity. When readers have correlation neglect, diversity in the interests of owners might lower the informativeness of news content.

Suggested Citation

  • Levy, Gilat & Moreno de Barreda, Inés & Razin, Ronny, 2018. "Persuasion with Correlation Neglect: Media Power via Correlation of News Content," CEPR Discussion Papers 12640, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:12640
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    Cited by:

    1. Philipp Denter & Martin Dumav & Boris Ginzburg, 2021. "Social Connectivity, Media Bias, and Correlation Neglect," The Economic Journal, Royal Economic Society, vol. 131(637), pages 2033-2057.
    2. Carl Heese & Stephan Lauermann, 2019. "Persuasion and Information Aggregation in Large Elections," CRC TR 224 Discussion Paper Series crctr224_2019_128, University of Bonn and University of Mannheim, Germany.
    3. Carl Heese & Stephan Lauermann, 2021. "Persuasion and Information Aggregation in Elections," ECONtribute Discussion Papers Series 112, University of Bonn and University of Cologne, Germany.
    4. Jeong, Daeyoung, 2019. "Using cheap talk to polarize or unify a group of decision makers," Journal of Economic Theory, Elsevier, vol. 180(C), pages 50-80.
    5. Eliaz, Kfir & Spiegler, Ran & Thysen, Heidi C., 2021. "Persuasion with endogenous misspecified beliefs," LSE Research Online Documents on Economics 109842, London School of Economics and Political Science, LSE Library.
    6. Emir Kamenica & Kyungmin Kim & Andriy Zapechelnyuk, 2021. "Bayesian persuasion and information design: perspectives and open issues," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 72(3), pages 701-704, October.

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