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News Media Bargaining Codes

Author

Listed:
  • Luca Sandrini

    (Research Center of Quantitative Social and Management Sciences, Faculty of Economics and Social Sciences, Budapest University of Technology and Economics, Műegyetem rkp. 3., H-1111 Budapest, Hungary.)

  • Robert Somogyi

    (Budapest University of Technology and Economics, and Centre for Economic and Regional Studies, Műegyetem rkp. 3., H-1111 Budapest, Hungary.)

Abstract

In this paper, we build a model of the news market where advertisers choose to allocate their ads between a social media platform and a news website that is the content creator. Our main objective is to evaluate a policy intervention that aims to foster news creation by transferring revenues from social media to news websites. Such interventions, commonly referred to as news media bargaining codes were first introduced in Australia in 2021 and are being implemented worldwide. We build on a novel trade-off between the higher advertising efficiency of social media and the value of content creation by news websites. When news quality is unaffected by the policy, we find that the equilibrium level of news creation may be socially sub-optimal. Moreover, we show that the policy intervention mandated by the bargaining code is always welfare-increasing. When news quality is endogenous, we nuance our results by showing that a poorly designed transfer can be inefficient. However, it still holds that the policy never harms consumers. Finally, we also provide some guidance on how to design the policy.

Suggested Citation

  • Luca Sandrini & Robert Somogyi, 2022. "News Media Bargaining Codes," Working Papers 22-06, NET Institute.
    • Handle: RePEc:net:wpaper:2206
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    File URL: http://www.netinst.org/Sandrini_22-06.pdf
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    More about this item

    Keywords

    social media; news website; bargaining code; platform regulation;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media

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