THE IMPACT OF ADVERTISING AND USER-GENERATED CONTENT ON MEDIA BIAS

Abstract

This dissertation consists of two studies that investigate the impact of advertising and user-generated content on media bias. The first study analyzes how advertising revenues in addition to subscription revenues play a role in affecting the extent of media bias. When making advertising choices, advertisers evaluate both the size and the composition of the readership of the different outlets. The profile of the readers matters since advertisers wish to target readers who are likely to be receptive to their advertising messages. It is demonstrated that when advertising supplements subscription fees, it may serve as a polarizing or moderating force, contingent upon the extent of heterogeneity among advertisers in appealing to readers having different political preferences. When heterogeneity is large, each advertiser chooses a single outlet for placing ads (Single-Homing), and greater polarization arises in comparison to the case that media relies only on subscription fees for revenues. In contrast, when heterogeneity is small, each advertiser chooses to place ads in multiple outlets (Multi-Homing), and reduced polarization results. In the second study, a newspaper’s decision to expand its product line by adding an online edition that incorporates user-generated content and the impact of this decision on its slanting of news are investigated. It is demonstrated that adding an online edition results in reduced profits for competing newspapers in comparison to an environment in which they offer only print editions. However, at the equilibrium, each newspaper offers the online version in order to avoid losing market share to rivals