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Media Bias and Reputation

  • Matthew Gentzkow
  • Jesse Shapiro

A Bayesian consumer who is uncertain about the quality of an information source will infer that the source is of higher quality when its reports conform to the consumer's prior expectations. We use this fact to build a model of media bias in which firms slant their reports toward the prior beliefs of their customers in order to build a reputation for quality. Bias emerges in our model even though it can make all market participants worse off. The model predicts that bias will be less severe when consumers receive independent evidence on the true state of the world, and that competition between independently owned news outlets can reduce bias. We present a variety of empirical evidence consistent with these predictions.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11664.

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Date of creation: Oct 2005
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Publication status: published as Gentzkow, Matthew and Jesse M. Shapiro. "Media Bias And Reputation," Journal of Political Economy, 2006, v114(2,Apr), 280-316.
Handle: RePEc:nbr:nberwo:11664
Note: LS PE
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  13. Grant, S & Kajii, A & Polak, B, 1997. "Intrinsic Preference for Information," Papers 323, Australian National University - Department of Economics.
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  17. Avery, Christopher & Chevalier, Judith, 1999. "Identifying Investor Sentiment from Price Paths: The Case of Football Betting," The Journal of Business, University of Chicago Press, vol. 72(4), pages 493-521, October.
  18. Wing Suen, 2004. "The Self-Perpetuation of Biased Beliefs," Economic Journal, Royal Economic Society, vol. 114(495), pages 377-396, 04.
  19. Paul Milgrom & John Roberts, 1980. "Predation, Reputation, and Entry Deterrence," Discussion Papers 427, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  20. Adam Brandenburger & Ben Polak, 1996. "When Managers Cover Their Posteriors: Making the Decisions the Market Wants to See," RAND Journal of Economics, The RAND Corporation, vol. 27(3), pages 523-541, Autumn.
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