Working Paper: NBER ID: w11664
Authors: Matthew Gentzkow; Jesse M. Shapiro
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.
Keywords: media bias; reputation; Bayesian model; consumer priors; competition
JEL Codes: L82; L10; D83
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Consumer priors (D11) | Media reporting (C59) |
| Independent verification of information (D83) | Incentive for firms to distort reports (H32) |
| Competition in media market (L13) | Erroneous reports being exposed (Y50) |
| Consumer priors (D11) | Media bias (J15) |
| Independent verification (C90) | Media bias (J15) |
| Competition (L13) | Media bias (J15) |