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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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File URL: http://www.econ.upf.edu/docs/papers/downloads/800.pdf
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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
Contact details of provider: Web page: http://www.econ.upf.edu/

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

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Find related papers by JEL classification:
  • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
  • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media

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  1. Baron, David P., 2004. "Persistent Media Bias," Research Papers 1845r, Stanford University, Graduate School of Business.
  2. 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.
  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 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.
  5. Zwiebel, Jeffrey H. & Vayanos, Dimitri & DeMarzo, Peter M., 2001. "Persuasion Bias, Social Influence, and Uni-Dimensional Opinions," Research Papers 1719, Stanford University, Graduate School of Business.
  6. 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.
  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. 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).
  9. Jonathan Reuter & Eric Zitzewitz, 2005. "Do Ads Influence Editors? Advertising and Bias in the Financial Media," Finance 0501003, EconWPA.
  10. 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.
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Cited by:

  1. Elena Panova, 2009. "Confirmatory News," Cahiers de recherche 0912, CIRPEE.
  2. Maria Petrova, 2009. "Newspapers and Parties: How Advertising Revenues Created an Independent Press," Working Papers w0131, Center for Economic and Financial Research (CEFIR).
  3. Petrova, Maria, 2012. "Mass media and special interest groups," Journal of Economic Behavior & Organization, Elsevier, vol. 84(1), pages 17-38.
  4. Sobbrio, Francesco, 2009. "Indirect Lobbying and Media Bias," MPRA Paper 18215, University Library of Munich, Germany.
  5. LI, Ming & MYLOVANOV, Tymofiy, 2010. "Credibility for Sale - The Effect of Disclosure on Information Acquisition and Transmission," Cahiers de recherche 08-2010, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  6. 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.
  7. Fabrizio Germano, 2008. "On commercial media bias," Economics Working Papers 1133, Department of Economics and Business, Universitat Pompeu Fabra, revised Apr 2009.
  8. Sobbrio, Francesco, 2009. "A Citizens-Editors Model of News Media," MPRA Paper 18213, University Library of Munich, Germany.
  9. 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).
  10. 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.
  11. 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.

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