Working Paper: CEPR ID: DP12640
Authors: Gilat Levy; Ines Moreno de Barreda; Ronny Razin
Abstract: We model the power of media owners to bias readers' opinions. In particular we consider readers that have "correlation neglect", i.e., fail to understand that content across news outlets might be correlated. We study how a media owner who controls several outlets can take advantage of the readers' neglect. Specifically, we show that the owner can manipulate readers' beliefs even when readers understand the informativeness of news outlet by outlet. The optimal strategy of the owner is to negatively correlate good news and positively correlate bad news. The owner's power is increasing in the number of outlets she owns but is constrained by the limited attention of readers. Importantly, our analysis suggests several new insights about welfare in media markets. First, measures of media bias have to take into account the correlation between news outlets. Second, media-market competition curbs the ability of owners to bias readers' beliefs. In particular, we show that readers always benefit from breaking media conglomerates, even when all the new media owners share the same bias. Finally, we highlight a potential cost of media diversity. When readers have correlation neglect, diversity in the interests of owners might lower the informativeness of news content.
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JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| media owner controls multiple outlets (L82) | can manipulate the correlation of news content (C10) |
| manipulation of correlation of news content (C10) | influence readers' beliefs (C92) |
| media monopolies (L43) | bias readers by controlling correlation of signals across outlets (C92) |
| increase in number of outlets owned (L81) | increase in manipulation of beliefs (D91) |
| competition among media markets (L13) | limit owners' ability to bias beliefs (D91) |
| breaking up media conglomerates (G34) | reduce scope for correlation neglect (C10) |
| diversity in ownership (G32) | lower informativeness of news content when readers exhibit correlation neglect (D80) |