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Media Bias and Reputation

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Author Info
Matthew Gentzkow
Jesse Shapiro

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Abstract

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.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11664.

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Date of creation: Oct 2005
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Handle: RePEc:nbr:nberwo:11664

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Find related papers by JEL classification:
L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media
L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information

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References listed on IDEAS
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