News consumption and media bias

Bias in the market for news is a well-documented phenomenon. Starting from the assumption that consumers want unbiased information, traditional economic theory cannot explain the existence of media bias in free societies, as it suggests that competition forces the media to be impartial.

by Miklos Sarvary, Yi Xiang
Last Updated: 23 Jul 2013

Recent research in economics proposes an alternative theory which assumes that consumers want to read (or watch) news that is consistent with their tastes or prejudices, rather than to know the truth.

In this paper, authors Yi Xiang, PhD student, and Miklos Sarvary, associate professor of marketing at INSEAD, build on this idea but recognize the dual nature of news consumption. Specifically, in addition to 'biased' consumers, they also assume the presence of 'conscientious' consumers - those whose sole interest is in knowing the truth. Furthermore, consistent with reality, they assume that media bias is constrained by the truth.

These two factors were expected to limit media bias in a competitive setting but the results of their research reveal quite the opposite. Specifically, the authors find that media bias increases when there are more conscientious consumers. However, this does not necessarily hurt conscientious consumers who may be able to retrieve additional information from multiple media sources, the more these are biased.

The existence of media bias is a challenge for marketing professionals because most advertising is channelled through the media, representing billions of dollars of business in the US alone. In this context, the existence of media bias raises several important questions: What kind of consumer behaviour drives media bias? How can bias persist in a competitive media environment in a free society? What are the social costs of biased media?

These are the general questions addressed in the paper. The authors also focus on two specific issues: What happens to media bias in a competitive setting if slanting is costly and constrained by the truth? And how will the relative proportion of consumers who assimilate news as a form of entertainment influence the extent of bias in the news market and affect media prices? 

News consumption and media bias
Yi Xiang, PhD student, and Miklos Sarvary
INSEAD 2006

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