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  • Matthew Ellman
  • Fabrizio Germano

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Abstract

We model the market for news as a two-sided market where newspapers sell news to readers who value accuracy and sell space to advertisers who value advert-receptive readers. We show that monopolistic newspapers under-report or bias news that sufficiently reduces advertiser profits. Newspaper competition generally reduces the impact of advertising. In fact, as the size of advertising grows, newspapers may paradoxically reduce advertiser bias, due to increasing competition for readers. However, advertisers can counter this effect of competition by committing to news-sensitive cut-off strategies, potentially inducing as much under-reporting as in the monopoly case.

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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 800.

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Date of creation: Dec 2004
Date of revision: Feb 2006
Handle: RePEc:upf:upfgen:800

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

Related research

Keywords: Two-sided markets; advertising; media accuracy; media bias; media economics.;

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References

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  1. GABSZEWICZ, Jean J. & LAUSSEL, Didier & SONNAC, Nathalie, . "Press advertising and the ascent of the `Pensée Unique'," CORE Discussion Papers RP -1512, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. Jeffrey Milyo & Tim Groseclose, 2005. "A Measure of Media Bias," Working Papers, Department of Economics, University of Missouri 0501, Department of Economics, University of Missouri, revised 25 Aug 2005.
  3. Besley, Timothy J. & Prat, Andrea, 2002. "Handcuffs for the Grabbing Hand? Media Capture and Government Accountability," CEPR Discussion Papers 3132, C.E.P.R. Discussion Papers.
  4. Jonathan Reuter & Eric Zitzewitz, 2006. "Do ADS Influence Editors? Advertising and Bias in the Financial Media," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 121(1), pages 197-227, 02.
  5. GABSZEWICZ, Jean & LAUSSEL, Didier & SONNAC, Nathalie, 2002. "Attitudes toward advertising and price competition in the press industry," CORE Discussion Papers, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) 2002026, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  6. Jorge A, Ferrando & Jean J, Gabszewicz & Didier Laussel & Nathalie Sonnac, 2004. "Two-Sided Network Effects and Competition : An Application to Media Industries," Working Papers, Centre de Recherche en Economie et Statistique 2004-09, Centre de Recherche en Economie et Statistique.
  7. Hawkins, Scott A & Hoch, Stephen J, 1992. " Low-Involvement Learning: Memory without Evaluation," Journal of Consumer Research, University of Chicago Press, University of Chicago Press, vol. 19(2), pages 212-25, September.
  8. Simon P. Anderson & Stephen Coate, 2005. "Market Provision of Broadcasting: A Welfare Analysis," Review of Economic Studies, Oxford University Press, vol. 72(4), pages 947-972.
  9. Peter M. Demarzo & Dimitri Vayanos & Jeffrey Zwiebel, 2003. "Persuasion Bias, Social Influence, And Unidimensional Opinions," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 118(3), pages 909-968, August.
  10. Baron, David P., 2004. "Persistent Media Bias," Research Papers 1845r, Stanford University, Graduate School of Business.
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Citations

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Cited by:
  1. Li, Ming & Tymofiy Mylovanov, 2009. "Credibility for Sale: the Effect of Disclosure on Information Acquisition and Transmission," Working Papers, Concordia University, Department of Economics 09008, Concordia University, Department of Economics, revised Oct 2009.
  2. Dewenter, Ralf & Heimeshoff, Ulrich, 2011. "Media Bias and Advertising: Evidence from German Car Magazines," Annual Conference 2011 (Frankfurt, Main): The Order of the World Economy - Lessons from the Crisis 48691, Verein für Socialpolitik / German Economic Association.
  3. Maria Petrova, 2010. "Mass Media and Special Interest Groups," Working Papers w0144, Center for Economic and Financial Research (CEFIR).
  4. Zilinsky, Jan, 2009. "Média, vlastníci a tlaky: súhrn poznatkov o trhu s informáciami
    [Media, owners and pressures: our understanding of the market for information]
    ," MPRA Paper 13660, University Library of Munich, Germany.
  5. Sobbrio, Francesco, 2009. "A Citizens-Editors Model of News Media," MPRA Paper 18213, University Library of Munich, Germany.
  6. Maria Petrova, 2009. "Newspapers and Parties: How Advertising Revenues Created an Independent Press," Working Papers w0131, Center for Economic and Financial Research (CEFIR).
  7. Dewenter, Ralf & Heimeshoff, Ulrich, 2012. "More ads, more revs? Is there a media bias in the likelihood to be reviewed?," DICE Discussion Papers 57, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
  8. Sobbrio, Francesco, 2009. "Indirect Lobbying and Media Bias," MPRA Paper 18215, University Library of Munich, Germany.
  9. Fabrizio Germano, 2008. "On commercial media bias," Economics Working Papers 1133, Department of Economics and Business, Universitat Pompeu Fabra, revised Apr 2009.
  10. Elena Panova, 2009. "Confirmatory News," Cahiers de recherche 0912, CIRPEE.
  11. Karen Moris, 2011. "La presse en tant que mécanisme de gouvernance disciplinaire," Revue Finance Contrôle Stratégie, revues.org, revues.org, vol. 14(4), pages 21-66, December.

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