A Theory of Media Bias and Disinformation

Abstract

The digital revolution has fundamentally transformed the news industry. To capture these developments, we build a model of media bias in which consumers with heterogeneous beliefs can choose between a variety of news outlets, biased outlets may spread disinformation, and consumers in turn can engage in (informal) fact-checking. We first show that with a single biased outlet fabricated news and fact-checking of counter-attitudinal news naturally are part of any equilibrium. In particular, the consumers who fact-check are those who face high interim uncertainty. Second, competition between biased outlets typically induces moderately biased consumers to follow the outlet that is biased against their belief. We also show how competition in many cases reduces disinformation considerably. Similarly, lowering the costs of fact-checking reduces disinformation and generates a Pareto-improvement for consumers. Finally, in presence of a neutral outlet, echo chambers arise endogenously in equilibrium because only partisans with extreme beliefs follow biased outlets.

Keywords: Disinformation, media bias, competition, news consumption, fabrication, echo chambers

JEL Classification: C72, D82, D83, L82