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JOHN T. GASPER
we examine formally how different evaluations of a political event may come from a purely
profit driven news organization.
The canonical rational choice and economic theory literature views the demand for news
as purely a demand for information. Consumers watch or listen in order to become more
informed. If the information is not accurate, then it is worth less to the consumer. So one
would think that competition from other outlets will drive the market to supply more accu-
rate information, much in the same way that market competition leads to better widgets.[4]
Therefore, one would expect that market competition would drive firms to converge to the
same coverage. However, why do we see claims otherwise?
In our model, we attempt to resolve this puzzle. We model individuals (news consumers)
as purposive. Yet, drawing on results from psychology, we also model individuals as having
to deal with the cognitive conflict involved with integrating information that counters their
prior opinion. Given that a news audience has these tendencies, we then analyze the market
competition. In particular, we study a game of product placement between two news
organizations. We show that it may be profitable for a news organization to position itself
away from its rival firm.
Other recent papers have also looked at trying to resolve the tension between the tra-
ditional theory and the claims to the contrary. In a working paper, David Baron looks
at a supply-side explanation. He argues that if the media organization can hire “activist”
journalists, it might do so to cut costs and raise profits [2]. In a paper that uses a similar
demand-side explanation to ours, Mullainathan and Shleifer show that newspaper organi-
zations might slant the news in order to raise the price that they can charge for the paper
[15].
Convention