Media Capture and Bias in the Market for News
Economics, Finance and Quantitative Analysis
We analyze a model of media bias under government capture and a free press. The government wants citizens to invest in a project. Citizens gain from investing only if the state of the economy is good. The state is unobserved. The media firm receives a noisy signal about the actual state and makes a report about whether or not the state of the economy is good. Citizens read the report and decide whether or not to invest. In this context, we show that media bias under government capture may be smaller (greater) than that under free press if the cost of investment is sufficiently high (low) provided that the signal noise is below a certain threshold. Finally, we show that the difference between the bias under government capture and free press diverges (converges) when the cost of investment is sufficiently high (low) in response to a reduction in noise.
B.E. Journal of Economic Analysis and Policy
Digital Object Identifier (DOI)