What Do the Papers Sell?
UPF Economics and Business Working Paper No. 800
41 Pages Posted: 16 Nov 2005
Date Written: May 2006
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.
Keywords: Two-sided markets, advertising, media accuracy, media bias, media economics
JEL Classification: L13, L82
Suggested Citation: Suggested Citation