Paying Positive to Go Negative: Advertisers' Competition and Media Reports

29 Pages Posted: 17 Jul 2011 Last revised: 17 Jan 2016

See all articles by Andrea Blasco

Andrea Blasco

Harvard University - Institute for Quantitative Social Science

Francesco Sobbrio

University of Rome Tor Vergata - Department of Economics and Finance; CESifo (Center for Economic Studies and Ifo Institute)

Paolo Pin

Dipartimento di Economia Politica, Università degli Studi di Siena

Date Written: January 11, 2016

Abstract

This paper analyzes a two-sided market for news where two rival advertisers may pay a media outlet to conceal negative information about the quality of their own product (paying positive to avoid negative) and/or to disclose negative information about the quality of their competitor's product (paying positive to go negative). We show that competition in the product market does not necessarily prevent the emergence of commercial media bias. Whether or not competing advertisers end up having negative consequences on news accuracy ultimately depends on the extent of correlation in the quality of their products: the lower the correlation, the higher the expected accuracy of the media outlet's reports. These findings provide a rationale to explain the observed differences in the extent of commercial media bias across seemingly similar industries or products, within the same media market. The results are robust to the presence of multiple media outlets and to asymmetries between the advertisers. Overall, the paper provides theoretical insights for media regulators and for the empirical literature examining the link between advertising and news contents.

Keywords: Advertising, Media accuracy, Two-sided market, Competition, Commercial Media Bias

JEL Classification: L82, D82

Suggested Citation

Blasco, Andrea and Sobbrio, Francesco and Pin, Paolo, Paying Positive to Go Negative: Advertisers' Competition and Media Reports (January 11, 2016). European Economic Review, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1884249 or http://dx.doi.org/10.2139/ssrn.1884249

Andrea Blasco (Contact Author)

Harvard University - Institute for Quantitative Social Science ( email )

1737 Cambridge St.
Cambridge, MA 02138
United States

Francesco Sobbrio

University of Rome Tor Vergata - Department of Economics and Finance ( email )

Via columbia 2
Rome, Rome 00123
Italy

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Paolo Pin

Dipartimento di Economia Politica, Università degli Studi di Siena ( email )

Piazza San Francesco 8
Siena, I53100
Italy

HOME PAGE: http://www.econ-pol.unisi.it/paolopin/

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