Media Bias When Advertisers Have Bargaining Power

Abstract

This article establishes a 2-sided media market in which readers have heterogeneous beliefs, media outlets choose their reporting biases, and advertisement prices are determined by bargaining between media outlets and advertisers. The authors have shown that the presence of advertisers strengthens the reporting bias. The bias is increasing in the advertisers' bargaining power and is generally stronger if the advertisers can advertise in multiple outlets. Finally, the authors present an extension of the model on the formation of joint operating agreements for advertising sales among competing newspapers and show that the media bias will be mitigated.