Competition and Ideological Diversity: Historical Evidence from US Newspapers

Abstract

We use data on US newspapers from the early 20th century to study the economic incentives that shape ideological diversity in the media. We show that households prefer like-minded news, and that newspapers seek both to cater to household tastes and to differentiate from their competitors. We estimate a model of newspaper demand, entry and political affiliation choice in which newspapers compete for both readers and advertisers. We find that economic competition enhances ideological diversity, that the market undersupplies diversity, and that incorporating the two-sidedness of the news market is critical to evaluating the effect of public policy.

The appendices for this paper are available at the following URL:http://ssrn.com/abstract=2195623

Keywords: entry models, differentiation, media, two-sided markets, advertising

JEL Classification: L11, L52, L82