Competition and Truth in the Market for News

34 Pages Posted: 25 Sep 2008

See all articles by Matthew Gentzkow

Matthew Gentzkow

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

Jesse M. Shapiro

Brown University - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: February 8, 2008

Abstract

In this essay, we evaluate the case for competition in news markets from the perspective of economics. First, we consider the simple proposition that when more points of view are heard and defended, beliefs will converge to the truth. This concept of "competition" is several steps removed from market competition among actual media firms, but it has played a prominent role in the legal arguments for a free press. We then explore three mechanisms by which increasing competition, or more precisely increasing the number of independently owned firms, can limit bias or distortions that originate on the supply side of the media market: First, when governments attempt to manipulate news, competition can increase the likelihood that the media remain independent. Second, when news providers have an interest in manipulating consumers' beliefs, diversity in such incentives can reduce the risk of information being suppressed or distorted. Third, competition may drive firms to invest in providing timely and accurate coverage. Overall, we argue that there are robust reasons to expect competition to be effective in disciplining supply side bias. Next, we ask how the effect of competition changes when distortions originate on the demand side of the market when consumers themselves demand biased or less socially relevant news. We find that increased competition may or may not improve welfare in these cases, though we caution against using this as a justification for concentrating media power in the hands of state controlled or regulated firms.

Suggested Citation

Gentzkow, Matthew Aaron and Shapiro, Jesse M., Competition and Truth in the Market for News (February 8, 2008). Chicago GSB Research Paper No. 16. Available at SSRN: https://ssrn.com/abstract=1269545 or http://dx.doi.org/10.2139/ssrn.1269545

Matthew Aaron Gentzkow (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Jesse M. Shapiro

Brown University - Department of Economics ( email )

64 Waterman Street
Providence, RI 02912
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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