Competition and Cognition in the Market for Online News

Abstract

Does it pay to appear unbiased in an attention-based economy where bias sells? We study this question in light of increased consumer partisan polarization and biases alongside greater technology usage and partisanship in journalism. Using a game-theoretic framework that captures the essential properties of the online news market, we show that polarization with biases may constrain neutral and partisan news websites' engagement-enhancing strategies differently; online news providers can strategically exploit consumer perceptions to maximize engagement-driven revenues. Our analysis suggests that neutral news outlets depend on polarization imbalance and perceptions of neutrality. Moreover, increased search costs and consumer bias toward partisan outlets can lessen the echo-chamber effect in online news consumption. Our work advances discussions on online news neutrality, providing fresh insights into the `marketplace of ideas' view and source versus content neutrality in the face of increasing affective polarization.

Keywords: online news, polarization, bias, engagement, cognition

JEL Classification: D43, D83