WHAT DO THE PAPERS SELL? A MODEL OF ADVERTISING AND MEDIA BIAS∗ (Pagehead title: ADVERTISING AND MEDIA BIAS)

We model the market for news as a two-sided market where news-papers sell news to readers who value accuracy and sell space to adver-tisers who value advert-receptive readers. In this setting, monopolistic newspapers under-report or bias news that sufficiently reduces adver-tiser profits. Paradoxically, increasing the size of advertising eventu-ally leads competing newspapers to reduce advertiser bias. Nonethe-less, advertisers can counter this effect if able to commit to news-sensitive cut-off strategies, potentially inducing as much bias as in the monopoly case. We use these results to explain contrasting historical and recent evidence on commercial bias and influence in the media