The Market for News

We investigate the market for news under two assumptions: that readers hold beliefs that they like to see confirmed, and that newspapers can slant stories toward these beliefs. We show that, on the topics where readers share common beliefs, one should not expect accuracy even from competitive media: competition results in lower prices, but common slanting toward reader biases. However, on topics where reader beliefs diverge (such as politically divisive issues), newspapers segment the market and slant toward the biases of their own audiences, yet in the aggregate a conscientious reader could get an unbiased perspective. Generally speaking, reader heterogeneity is more important for accuracy in media than competition per se. ∗We are extremely grateful to Alberto Alesina, Daniel Benjamin, Tim Besley, Gene D’Avolio, Glenn Ellison, Josh Fischman, Edward Glaeser, Matthew Gentzkow, Simon Johnson, Emir Kamenica, Lawrence Katz, David Laibson, Dominique Olie Lauga, Emily Oster, Richard Posner, Jesse Shapiro, Jeremy Stein, Lawrence Summers and three anonymous referees for comments. This paper is a substantially revised version of an earlier paper entitled “Media Bias”. e-mail: [email protected] and [email protected].