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Author Info

  • 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. Timothy Besley & Andrea Prat, 2005. "Handcuffs for the Grabbing Hand? Media Capture and Government Accountability," STICERD - Political Economy and Public Policy Paper Series 07, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  2. Gabszewicz, Jean J. & Laussel, Dider & Sonnac, Nathalie, 2001. "Press advertising and the ascent of the 'Pensee Unique'," European Economic Review, Elsevier, vol. 45(4-6), pages 641-651, May.
  3. Tim Groseclose & Jeffrey Milyo, 2005. "A Measure of Media Bias," The Quarterly Journal of Economics, MIT Press, vol. 120(4), pages 1191-1237, November.
  4. GABSZEWICZ, Jean & LAUSSEL, Didier & SONNAC, Nathalie, 2002. "Attitudes toward advertising and price competition in the press industry," CORE Discussion Papers 2002026, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  5. Simon P. Anderson & Stephen Coate, 2003. "Market Provision of Broadcasting: A Welfare Analysis," Virginia Economics Online Papers 358, University of Virginia, Department of Economics.
  6. Jonathan Reuter & Eric Zitzewitz, 2005. "Do Ads Influence Editors? Advertising and Bias in the Financial Media," Finance 0501003, EconWPA.
  7. Hawkins, Scott A & Hoch, Stephen J, 1992. " Low-Involvement Learning: Memory without Evaluation," Journal of Consumer Research, University of Chicago Press, vol. 19(2), pages 212-25, September.
  8. Jorge A, Ferrando & Jean J, Gabszewicz & Didier Laussel & Nathalie Sonnac, 2004. "Two-Sided Network Effects and Competition : An Application to Media Industries," Working Papers 2004-09, Centre de Recherche en Economie et Statistique.
  9. Baron, David P., 2004. "Persistent Media Bias," Research Papers 1845r, Stanford University, Graduate School of Business.
  10. Peter M. Demarzo & Dimitri Vayanos & Jeffrey Zwiebel, 2003. "Persuasion Bias, Social Influence, And Unidimensional Opinions," The Quarterly Journal of Economics, MIT Press, vol. 118(3), pages 909-968, August.
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Citations

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Cited by:
  1. 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.
  2. Sobbrio, Francesco, 2009. "A Citizens-Editors Model of News Media," MPRA Paper 18213, University Library of Munich, Germany.
  3. Fabrizio Germano, 2008. "On commercial media bias," Economics Working Papers 1133, Department of Economics and Business, Universitat Pompeu Fabra, revised Apr 2009.
  4. Maria Petrova, 2010. "Mass Media and Special Interest Groups," Working Papers w0144, Center for Economic and Financial Research (CEFIR).
  5. Karen Moris, 2011. "La presse en tant que mécanisme de gouvernance disciplinaire," Revue Finance Contrôle Stratégie, revues.org, vol. 14(4), pages 21-66, December.
  6. 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).
  7. Li, Ming & Tymofiy Mylovanov, 2009. "Credibility for Sale: the Effect of Disclosure on Information Acquisition and Transmission," Working Papers 09008, Concordia University, Department of Economics, revised Oct 2009.
  8. Maria Petrova, 2009. "Newspapers and Parties: How Advertising Revenues Created an Independent Press," Working Papers w0131, Center for Economic and Financial Research (CEFIR).
  9. 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.
  10. Ascensión Andina-Díaz, 2008. "Media Competition and Information Disclosure," Working Papers 2008-5, Universidad de Málaga, Department of Economic Theory, Málaga Economic Theory Research Center.
  11. Elena Panova, 2009. "Confirmatory News," Cahiers de recherche 0912, CIRPEE.
  12. Sobbrio, Francesco, 2009. "Indirect Lobbying and Media Bias," MPRA Paper 18215, University Library of Munich, Germany.

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