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News consumption and media bias

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Bias in the market for news is a well documented phenomenon. Based on the assumption that consumers want non-partisan, unbiased information, traditional economic theory cannot explain media bias in free societies as it suggests that competition forces media to be unbiased. Recent research in economics proposes an alternative theory assuming that consumers want to read (watch) news that is consistent with their tastes or prior beliefs rather than to seek information about the truth (Mullainathan and Schleifer, 2005). The present paper builds on this idea but recognizes the dual nature of news consumption. Specifically, in contrast to Mullainathan and Schleifer (2005), besides 'biased' consumers we also assume the presence of 'conscientious' consumers whose sole interest is in knowing the truth. Furthermore, consistent with reality, we assume that media bias is constrained by the truth. These two factors were expected to limit media bias in a competitive setting. Our results reveal the opposite. Specifically, we find that media bias increases when there are more conscientious consumers. However, this increased media bias does not necessarily hurt conscientious consumers who may be able to recover more information from multiple media outlets, the more these are biased.

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