Handbook of Media Economics, vol 1B

14.4. A MODEL OF THE MARKET FOR NEWS

We now introduce a stylized model of the news market, which we use to capture key

points from the discussion above, and to summarize and frame our subsequent discussion

of the literature. There is a continuum of consumers indexed by i, and either one or two

media firms, each operating at most one outlet. As above, the state is θ 2 L, R

fg

, firms

observe independent signals s, and firms make reports n. We restrict attention to the case

of binary reports, N ¼ l, r

fg

. The prior probability of θ ¼R is 0.5.

We consider particular forms of both distortion and filtering bias. In both cases, strat-

egies will be represented by a single-dimensional index of bias b 21,1½, where a strat-

egy with bias b is biased to the