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Time scarcity and the market for news

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Abstract

We develop a theory of news coverage in environments of information abundance. News consumers are time-constrained and browse through news items that are available across competing outlets, choosing which ones to read or skip. Media firms are aware of consumers' preferences and constraints, and decide on rankings of news items that maximize their profits. We find that, even when readers and outlets are rational and unbiased and when markets are competitive, readers may read more than they would like to, and the stories they read may be significantly different from the ones they prefer. Next, we derive implications on diverse aspects of new and traditional media. These include a rationale for tabloid news, a theory of optimal advertisement placement in newscasts, and a justification for readers' migration to online media platforms in order to circumvent inefficient rankings found in traditional media. We then analyze methods for restoring reader-efficient standards and discuss the political economy implications of the theory.

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Bibliographic Info

Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 1348.

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Date of creation: Dec 2012
Date of revision: Dec 2013
Handle: RePEc:upf:upfgen:1348

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Web page: http://www.econ.upf.edu/

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Keywords: Media competition; news ranking; political economy; scarcity of time;

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References

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  1. Jonathan D. Levin, 2011. "The Economics of Internet Markets," NBER Working Papers 16852, National Bureau of Economic Research, Inc.
  2. Matthew Ellman & Fabrizio Germano, 2009. "What do the Papers Sell? A Model of Advertising and Media Bias," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 119(537), pages 680-704, 04.
  3. Fabrizio Germano & Martin Meier, 2011. "Concentration and Self-Censorship in Commercial Media," Working Papers 527, Barcelona Graduate School of Economics.
  4. Chrysanthos Dellarocas & Zsolt Katona & William Rand, 2010. "Media, Aggregators and the Link Economy: Strategic Hyperlink Formation in Content Networks," Working Papers, NET Institute 10-13, NET Institute.
  5. Timothy Van Zandt, 2004. "Information Overload in a Network of Targeted Communication," RAND Journal of Economics, The RAND Corporation, vol. 35(3), pages 542-560, Autumn.
  6. Matthew Gentzkow & Jesse M. Shapiro, 2008. "Competition and Truth in the Market for News," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 22(2), pages 133-154, Spring.
  7. Susan Athey & Emilio Calvano & Joshua Gans, 2013. "The Impact of the Internet on Advertising Markets for News Media," NBER Working Papers 19419, National Bureau of Economic Research, Inc.
  8. Lesley Chiou & Catherine Tucker, 2011. "How Does Content Aggregation Affect Users' Search for Information?," Working Papers, NET Institute 11-18, NET Institute, revised Oct 2011.
  9. Reis, Ricardo, 2006. "Inattentive consumers," Journal of Monetary Economics, Elsevier, Elsevier, vol. 53(8), pages 1761-1800, November.
  10. Greg Taylor, 2013. "Search Quality and Revenue Cannibalization by Competing Search Engines," Journal of Economics & Management Strategy, Wiley Blackwell, Wiley Blackwell, vol. 22(3), pages 445-467, 09.
  11. Mark Armstrong & John Vickers & Jidong Zhou, 2008. "Prominence and Consumer Search," Economics Series Working Papers 379, University of Oxford, Department of Economics.
  12. Lisa George & Joel Waldfogel, 2003. "Who Affects Whom in Daily Newspaper Markets?," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 111(4), pages 765-784, August.
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Cited by:
  1. Roberto Burguet & Ramon Caminal & Matthew Ellman, 2013. "In Google we trust?," UFAE and IAE Working Papers, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC) 935.13, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC), revised 12 Feb 2014.

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