Working Paper: NBER ID: w18234
Authors: Matthew Gentzkow; Jesse M. Shapiro; Michael Sinkinson
Abstract: We study the competitive forces that shaped ideological diversity in the US press in the early twentieth century. We find that households preferred like-minded news and that newspapers used their political orientation to differentiate from competitors. We formulate a model of newspaper demand, entry, and political affiliation choice in which newspapers compete for both readers and advertisers. We use a combination of estimation and calibration to identify the model's parameters from novel data on newspaper circulation, costs, and revenues. The estimated model implies that competition enhances ideological diversity, that the market undersupplies diversity, and that optimal competition policy requires accounting for the two-sidedness of the news market.
Keywords: competition; ideological diversity; newspapers
JEL Codes: L11; L52; L82
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Competition among newspapers (L13) | Ideological diversity (D72) |
| 10 percentage point increase in the town's Republican vote share (D79) | 10 percent increase in the circulation of Republican papers relative to Democratic papers (D72) |
| Market competition (L13) | Supply of ideological diversity (D72) |
| Allowing newspapers to collude on advertising prices (K21) | Increased economic welfare and diversity (D69) |
| Colluding on circulation prices (D43) | Mixed effects on economic welfare and diversity (F69) |
| Policies aimed at enhancing competition (L49) | Improvement in ideological diversity (D72) |