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Time Scarcity and the Market for News

  • Larbi Alaoui
  • Fabrizio Germano

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

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Date of creation: Sep 2014
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Handle: RePEc:bge:wpaper:675
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  1. Susan Athey & Emilio Calvano & Joshua S. Gans, 2014. "The Impact of the Internet on Advertising Markets for News Media," CSEF Working Papers 379, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  2. Jonathan D. Levin, 2011. "The Economics of Internet Markets," NBER Working Papers 16852, National Bureau of Economic Research, Inc.
  3. Simon P. Anderson & André de Palma, 2012. "Competition for attention in the Information (overload) Age," RAND Journal of Economics, RAND Corporation, vol. 43(1), pages 1-25, 03.
  4. Reis, Ricardo, 2006. "Inattentive consumers," Journal of Monetary Economics, Elsevier, vol. 53(8), pages 1761-1800, November.
  5. 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.
  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. Mark Armstrong & John Vickers & Jidong Zhou, 2009. "Prominence and consumer search," RAND Journal of Economics, RAND Corporation, vol. 40(2), pages 209-233.
  8. Fabrizio Germano & Martin Meier, 2011. "Concentration and Self-Censorship in Commercial Media," Working Papers 527, Barcelona Graduate School of Economics.
  9. Chrysanthos Dellarocas & Zsolt Katona & William Rand, 2010. "Media, Aggregators and the Link Economy: Strategic Hyperlink Formation in Content Networks," Working Papers 10-13, NET Institute.
  10. Greg Taylor, 2013. "Search Quality and Revenue Cannibalization by Competing Search Engines," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 22(3), pages 445-467, 09.
  11. 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.
  12. Lesley Chiou & Catherine Tucker, 2011. "How Does Content Aggregation Affect Users' Search for Information?," Working Papers 11-18, NET Institute, revised Oct 2011.
  13. White, Alexander, 2013. "Search engines: Left side quality versus right side profits," International Journal of Industrial Organization, Elsevier, vol. 31(6), pages 690-701.
  14. 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.
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