Media Bias and Reputation
University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)
Jesse M. Shapiro
University of Chicago; National Bureau of Economic Research (NBER)
Journal of Political Economy, Vol. 114, pp. 280-316, April 2006
A Bayesian consumer who is uncertain about the quality of an information source will infer that the source is of higher quality when its reports conform to the consumer's prior expectations. We use this fact to build a model of media bias in which firms slant their reports toward the prior beliefs of their customers in order to build a reputation for quality. Bias emerges in our model even though it can make all market participants worse off. The model predicts that bias will be less severe when consumers receive independent evidence on the true state of the world and that competition between independently owned news outlets can reduce bias. We present a variety of empirical evidence consistent with these predictions.
Date posted: May 17, 2006