Competition and Truth in the Market for News

Abstract

In this essay, we evaluate the case for competition in news markets from the perspective of economics. First, we consider the simple proposition that when more points of view are heard and defended, beliefs will converge to the truth. This concept of "competition" is several steps removed from market competition among actual media firms, but it has played a prominent role in the legal arguments for a free press. We then explore three mechanisms by which increasing competition, or more precisely increasing the number of independently-owned firms, can limit bias or distortions that originate on the supply-side of the media market: First, when governments attempt to manipulate news, competition can increase the likelihood that the media remain independent. Second, when news providers have an interest in manipulating consumers' beliefs, diversity in such incentives can reduce the risk of information being suppressed or distorted. Third, competition may drive firms to invest in providing timely and accurate coverage. Overall, we argue that there are robust reasons to expect competition to be effective in disciplining supply-side bias. Next, we ask how the effect of competition changes when distortions originate on the demand side of the market -- when consumers themselves demand biased or less socially relevant news. We find that increased competition may or may not improve welfare in these cases, though we caution against using this as a justification for concentrating media power in the hands of state-controlled or regulated firms.

Reforming Welfare States

“…One interesting question in this context is under which conditions media are able to correct information deficiencies. The literature on media bias (surveyed in Gentzkow and Shapiro, 2008) is optimistic that competition of independent media helps correcting biases which result from government manipulation or single media's manipulative objectives. According to this literature, media competition is not able to correct biases which are demand-driven because consumers may ask for biased news or for news without significant information content.…”

Effects of Taxes and Subsidies on Media Services

“…In the absence of journalist number two, one journalist would easily be able to distort the truth. Gentzkow and Shapiro (2008) give an overview of the literature on "truth-telling" and the importance of competition in the news market.…”

Concentration and Self-Censorship in Commercial Media

“…In times where newspapers are under financial constraints and the availability of "public relations" materials relatively (and increasingly) cheap and abundant, it can be particularly attractive for newsrooms to increasingly rely on public relations sources. 26 …”