Department of Economics Massachusetts Institute of Technology(MIt Working Paper No. 02-33 Institute for Economic research Harvard University Institute Research Working Paper No. 1981 Media bias Sendhil mullainathan MIT, NBER Andrei shleifer Harvard University; NBER This paper can be downloaded without charge from the Social Science Research Network Electronic Paper Collection at http://ssrn.com/abstractid=335800
Department of Economics Massachusetts Institute of Technology (MIT) Working Paper No. 02-33 Institute for Economic Research Harvard University Institute Research Working Paper No. 1981 Media Bias Sendhil Mullainathan MIT; NBER Andrei Shleifer Harvard University; NBER This paper can be downloaded without charge from the Social Science Research Network Electronic Paper Collection at: http://ssrn.com/abstract_id=335800
Media bias Sendhil mull Andrei shleifer (MIT and NBeR (Harvard University and NBER) October 1. 2002 abstract There are two different types of media bias. One bias, which we refer to as ideology, cts a news out lets desire to affect reader opinions in a particular direct ion. The second bias, which we refer to as spin, reflect s the out let's attempt to simply create a memorable story. We examine compet it ion among media out lets in the presence f these biases. Whereas compet it ion can eliminate the effect of ideological bias, it act ually exaggerates the incentive to spin stories. We are extremely grateful to Alberto Alesina, Gene D'Avolio, Ed Glaeser, Simon Johnson, Larry Katz and richard Posner for comments. e-mail: mullain @mit. e du and ashleifergharvard edu
Media Bias Sendhil Mullainathan (MIT and NBER) Andrei Shleifer (Harvard University and NBER) October 1, 2002 Abstract There are two di erent types of media bias. One bias, which we refer to as ideology, re ects a news outlet's desire to a ect reader opinions in a particular direction. The second bias, which we refer to as spin, re ects the outlet's attempt to simply create a memorable story. We examine competition among media outlets in the presence of these biases. Whereas competition can eliminate the e ect of ideological bias, it actually exaggerates the incentive to spin stories. We are extremely grateful to Alberto Alesina, Gene D'Avolio, Ed Glaeser, Simon Johnson, Larry Katz and Richard Posner for comments. e-mail: mullain@mit.edu and ashleifer@harvard.edu. 1
1 Introduction The descript ive account s of the media industry(Mencken 1975, Goldberg 2002), as well as journalism text books(Jamieson and Campbell 2002) recognize that media out lets do not just report plain facts. One commonly noted bias in report ing is ideological During President Clinton's impeachment trial the right-leaning media supported im- peachment, arguing that even a small lie in a civ il deposit ion const it utes a ma jor crime The left-leaning media, in contrast, saw the trial as a wit ch-hunt, treating the very same violat ions condemned by the conservat ive press as trivial. Another, perhaps less com- monly noted, bias is not ideological at all, but rather results from the need to tell a memorable story. Thus bot h the conservat ive and the liberal media condemned Wen Ho Lee as a Chinese spy, wit hout entert aining the possibility that he was scape-goated by dishonest officials The media were surely biased, and probably wro In this paper, we draw a sharp analytical dist inct ion between these two kinds of biased report ing. We call the tradit ional left or right bias ideology, and the less tradi tional bias- one based on the need to tell a story - spin. We see ideology as coming direct ly from the preferences of eit her editors porters For example, left wing newspapers may simply prefer to report news one way. We see spin, on the ot her hand,as coming from a new spaper's attempt to tell a simple and memorable story The act of simplication leads to bias since some informat ion is necessarily discarded. We examine the consequences of bot h ideology and spin for the accuracy of news re- Our principal interest is how compet ition affect s accuracy even wit h competition, the truth may not always come out, especially when spin We consider the case of private media out lets maxin t he we fare of t heir owners which depends on ideology and profits. We begin with the case of a monopoly news supplier. We est ablish that, wit h Bayesian readers, only the ideology of the media out let is a source of bias in reporting. But we also consider the case of readers who are categorical thinkers- have limited memory, and can only remember the"bottom line. This psy chological assumption allows us to analy ze the commonly noted need
1 Introduction The descriptive accounts of the media industry (Mencken 1975, Goldberg 2002), as well as journalism textbooks (Jamieson and Campbell 2002) recognize that media outlets do not just report plain facts. One commonly noted bias in reporting is ideological. During President Clinton's impeachment trial, the right-leaning media supported impeachment, arguing that even a small lie in a civil deposition constitutes a ma jor crime. The left-leaning media, in contrast, saw the trial as a witch-hunt, treating the very same violations condemned by the conservative press as trivial. Another, perhaps less commonly noted, bias is not ideological at all, but rather results from the need to tell a memorable story. Thus both the conservative and the liberal media condemned Wen Ho Lee as a Chinese spy, without entertaining the possibility that he was scape-goated by dishonest ocials. The media were surely biased, and probably wrong. In this paper, we draw a sharp analytical distinction between these two kinds of biased reporting. We call the traditional left or right bias ideology, and the less traditional bias - one based on the need to tell a story { spin. We see ideology as coming directly from the preferences of either editors or reporters. For example, left wing newspapers may simply prefer to report news one way. We see spin, on the other hand, as coming from a newspaper's attempt to tell a simple and memorable story. The act of simplication leads to bias since some information is necessarily discarded. We examine the consequences of both ideology and spin for the accuracy of news reporting. Our principal interest is how competition a ects accuracy. We show that, even with competition, the truth may not always come out, especially when spin is important. We consider the case of private media outlets maximizing the welfare of their owners, which depends on ideology and pro ts. We begin with the case of a monopoly news supplier. We establish that, with Bayesian readers, only the ideology of the media outlet is a source of bias in reporting. But we also consider the case of readers who are categorical thinkers - have limited memory, and can only remember the \bottom line." This psychological assumption allows us to analyze the commonly noted need 2
by media out lets to tell a memorable story, the so-called"narrat ive imperative". With categorical readers, it pays the monopolist news supplier to spin the news in order to make them memorable even in the absence of any ideology. This spin -the need to tell the story orting b The m nteresting issues arise when we consider compet ition among media out- lets. Such compet it ion is an import ant argument for free press: despite the ideolog ical biases of individual news suppliers, the truth comes out through competit ion. We show that,with Bayesian readers, this is indeed the case: competition undoes the biases from ideology. Wit h readers who are categorical thinkers, however, the conse quences of competit ion are more complex. We show that, in the absence of ideology, compet ition act ually reinforces the adverse effect s of spin on accuracy. Not only do the media out let s bias news reporting, but the stories reinforce each ot her. As each paper pins stories, it increases the incentives of later outlet s to spin. This piling on of storie neans non-ideological compet ition worsens the bias of spin. Moreove In can exac- erbate the influence of one-sided ideo logy. When the first news out let that uncovers the story is ideological and later ones are not, the first one sets the tone and later ones his spin. This can explain why and how inside s leak infor mat ion t news out let s: their principal mot ivat ion is to control how t he story is event ually spun. Our the ting falls between t is that readers demand, and media outlet s supply, pure informat ion about polit ical and economic market s, and thereby facilit ate better consumer and voter choice(Coase 1974, Besley and Burgess 2001, Besley and Prat 2002, Djankov et al. 2002, Stromberg 2001, Dyck and Zingales 2002). The opposite but also plausible view, pursued by Mencken(1920) and Jensen(1976), sees the medi grounding in reality. The perspect ive of t his paper is that media out let s provide neit her unadulterated infor mation, nor pure entertainment. News out let s may be biased for ideological reasons. And consumers, while not desiring pure entert ainment as might be the case wit h sensational or human int erest stories, do indirect ly affect news content Dyck and Zignales(2002)go further and examine how private incentives might bias corporate news
by media outlets to tell a memorable story, the so-called \narrative imperative". With categorical readers, it pays the monopolist news supplier to spin the news in order to make them memorable even in the absence of any ideology. This spin - the need to tell the story - is also a source of reporting bias. The more interesting issues arise when we consider competition among media outlets. Such competition is an important argument for free press: despite the ideological biases of individual news suppliers, the truth comes out through competition. We show that, with Bayesian readers, this is indeed the case: competition undoes the biases from ideology. With readers who are categorical thinkers, however, the consequences of competition are more complex. We show that, in the absence of ideology, competition actually reinforces the adverse e ects of spin on accuracy. Not only do the media outlets bias news reporting, but the stories reinforce each other. As each paper spins stories, it increases the incentives of later outlets to spin. This piling on of stories means non-ideological competition worsens the bias of spin. Moreover, spin can exacerbate the in uence of one-sided ideology. When the rst news outlet that uncovers the story is ideological and later ones are not, the rst one sets the tone and later ones reinforce this spin. This can explain why and how inside sources leak information to news outlets: their principal motivation is to control how the story is eventually spun. Our theory of news reporting falls between two extremes. The traditional view is that readers demand, and media outlets supply, pure information about political and economic markets, and thereby facilitate better consumer and voter choice (Coase 1974, Besley and Burgess 2001, Besley and Prat 2002, Djankov et al. 2002, Stromberg 2001, Dyck and Zingales 2002).1 The opposite but also plausible view, pursued by Mencken (1920) and Jensen (1976), sees the media as entertainment, with no obvious grounding in reality. The perspective of this paper is that media outlets provide neither unadulterated information, nor pure entertainment. News outlets may be biased for ideological reasons. And consumers, while not desiring pure entertainment as might be the case with sensational or human interest stories, do indirectly a ect news content 1Dyck and Zignales (2002) go further and examine how private incentives might bias corporate news reporting. 3
because of how they process informat ion. So for reasons of ideology news out lets may bias informat ion to please their owners, and for reasons of consumer psy chology they may bias the informat ion to please t heir readers These results have significant implicat ions for media accuracy. They explain, particular, how the media in the aggregate are likely to get to the bottom of a news story with significant ideological dimension. Ideological diversity serves as a safeguard against spin. Our results are consistent wit h Richard Posner's(1999)highly favorable assessment of the press in the coverage of the Clinton affair. Our result s also show why media bias is most severe in the cases where no or litt le ideological diversity bears on the story, such as the invest igat ion of Wen Ho Lee. In this case, the bias comes from spin, and spin causes the followers to pile on. Competit ion among media out lets is not a solut ion to the problem of spin- indeed, it makes the problem worse. Our paper makes the case for extreme ideological diversity in the media- in such diversity lies the best he 2 Model setup There are two players: the newspaper and the reader. The newspaper is eit her good or bad A good newspaper has access to some information that the reader wants. A bad newspaper, on the ot her hand, has no useful informat ion. The reader uses the newspaper to improve his estimate of some value t. We begin by assuming that t a single real number. This value could be many things: for example, the quality of a polit ician or the financial health of a firm. The common prior is t NN(0, 0), i.e. t is normally distributed wit h variance o2 There are three periods. In the first period, t he reader receives a signal r about the trut h. This signal reflect s the reader's prejudice about the topic before he reads At a more general level, this paper is part of a broader literature on the interaction between competition and individual psy chology, e.g. Russell and Thaler(1985), De Long et. al.(1990) and Camerer(1998 3For simplicity, we use this terminology of " ne wspaper"and"reader"but nothing we di scuss is specific A A bad newspaper cannot m anufacture stories to appear good. We use the se two ty pes merely as a way to model the incentives of the good newspaper to create memorable stories. If no stories are remembered the newspaper is per ceived to be bad and loses subscribers
because of how they process information. So for reasons of ideology news outlets may bias information to please their owners, and for reasons of consumer psychology they may bias the information to please their readers. These results have signi cant implications for media accuracy. They explain, in particular, how the media in the aggregate are likely to get to the bottom of a news story with signi cant ideological dimension. Ideological diversity serves as a safeguard against spin. Our results are consistent with Richard Posner's (1999) highly favorable assessment of the press in the coverage of the Clinton a air. Our results also show why media bias is most severe in the cases where no or little ideological diversity bears on the story, such as the investigation of Wen Ho Lee. In this case, the bias comes from spin, and spin causes the followers to pile on. Competition among media outlets is not a solution to the problem of spin - indeed, it makes the problem worse. Our paper makes the case for extreme ideological diversity in the media - in such diversity lies the best hope against spin.2 2 Model Setup There are two players: the newspaper and the reader.3 The newspaper is either good or bad. A good newspaper has access to some information that the reader wants. A bad newspaper, on the other hand, has no useful information.4 The reader uses the newspaper to improve his estimate of some value t. We begin by assuming that t is a single real number. This value could be many things: for example, the quality of a politician or the nancial health of a rm. The common prior is t N(0; 2 ), i.e. t is normally distributed with variance 2 . There are three periods. In the rst period, the reader receives a signal r about the truth. This signal re ects the reader's prejudice about the topic before he reads 2At a more general level, this paper is part of a broader literature on the interaction between competition and individual psychology, e.g. Russell and Thaler (1985), De Long et. al. (1990) and Camerer (1998). 3For simplicity, we use this terminology of \newspaper" and \reader" but nothing we discuss is speci c to this medium. Our analysis applies to news outlets generally speaking. 4A bad newspaper cannot manufacture stories to appear good. We use these two types merely as a way to model the incentives of the good newspaper to create memorable stories. If no stories are remembered the newspaper is perceived to be bad and loses subscribers. 4
t he newspaper. This prejudice could be shaped by basic beliefs about how the world operates. For example, in the Wen Ho Lee case readers may have st arted wit h the presumpt ion that the Chinese are likely to be spy ing on the U.S. Alternat ively, this signal may it self be the result of ot her newspaper stories or rumors the person has heard. In short, r is summary of the reader's prior conv ictions and prejudices before he reads the newspaper. The signal r is a noisy est imate of the trut h, so t+er here er is distributed normally N(O, a2). The reader uses this signal to update his beliefs The newspaper may also receive a signal. Good newspapers receive a signal for sure d bad news denoted n and equals the truth plus some noise: n =t+en, where en is normally distributed wit h variance on. Though we make n uni-dimensional for simplicity, one can think of n as really a bundle of facts In the second period, t he newspaper decides what to report. A bad newspaper has no news to report. A good newspaper, in contrast, has news n which it may modify reporting. Let s denote this modificat ion, so the paper reports v =n +s We are t hinking of a newspaper receiving a lot of fact s about a particular issue, all potentially point ing in somew hat different direct ions, and needing to distill them int a memorable story. We think of the modificat ion s not as invention or fabricat ion of new facts, but rather as a way to emphasize some facts, and de-emphasize ot hers, so the readers extract from the story a sy nt, hesized bot tom line Manipulation of informat ion can take a variety of forms. In some countries, news papers just make up facts to corroborate t heir stories, but we do not believe that this phenomenon is import ant in the U.S. Rat her, we are modeling the sit uation where a newspaper biases stories in more subt le ways. Reports can ignore or omit information inconsistent with t he message of t he story, build up"informat ion sources that corrob orate the story, ignore or undermine information sources that contradict the message. We form ally study this second case when we r multiple new
the newspaper. This prejudice could be shaped by basic beliefs about how the world operates. For example, in the Wen Ho Lee case readers may have started with the presumption that the Chinese are likely to be spying on the U.S. Alternatively, this signal may itself be the result of other newspaper stories or rumors the person has heard.5 In short, r is summary of the reader's prior convictions and prejudices before he reads the newspaper. The signal r is a noisy estimate of the truth, so r = t + er where er is distributed normally N(0; 2 r ). The reader uses this signal to update his beliefs. The newspaper may also receive a signal. Good newspapers receive a signal for sure and bad newspapers receive no signal. The signal they receive is denoted n and equals the truth plus some noise: n = t + en, where en is normally distributed with variance 2n. Though we make n uni-dimensional for simplicity, one can think of n as really a bundle of facts. In the second period, the newspaper decides what to report. A bad newspaper has no news to report. A good newspaper, in contrast, has news n which it may modify before reporting. Let s denote this modi cation, so the paper reports = n + s. We are thinking of a newspaper receiving a lot of facts about a particular issue, all potentially pointing in somewhat di erent directions, and needing to distill them into a memorable story. We think of the modi cation s not as invention or fabrication of new facts, but rather as a way to emphasize some facts, and de-emphasize others, so the readers extract from the story a synthesized bottom line. Manipulation of information can take a variety of forms. In some countries, newspapers just make up facts to corroborate their stories, but we do not believe that this phenomenon is important in the U.S. Rather, we are modeling the situation where a newspaper biases stories in more subtle ways. Reports can ignore or omit information inconsistent with the message of the story, \build up" information sources that corroborate the story, ignore or undermine information sources that contradict the message, 5We formally study this second case when we consider multiple newspapers. 5
colorful but misleading language and images that support the story. These types of informat ion manipulat ion need not involve inaccuracies, but at the same time address"t he narrat ive imperat ive Modificat ion is cost ly to the newspaper. First, it requires cost ly story-telling and research necessary to bolster t he t heme of the report. Second, and far more import ant ly, bot h the newspapers and the reporters that work for them care about accuracy, and excessive modificat ion of the news raises the risk of being wrong. Let c(n-v)denote the cost of modify ing the news We assume that c(0)=0 and that sign(c(x))=sign(x)>0 (x)=0, limr-1 c(x)=l and limx-0 c(x)=0. These assumpt ions mean that manipulat ion, in either direct ion, is costly to the newspaper In the third period, the e reader rea the story. He then combines what he reads ith his priors to form an assessment of t. Define this belief to be t. After beliefs are formed, the reader may forget the story or not. If he remembers the story, he presumes the newspaper is good. If he does not he presumes the paper is bad 2,1 Re ader p sy chology The model turns on how we assume readers form beliefs and remember infor mat ion. At one extreme, we might suppose people form Bayesian beliefs and have perfect recall In this case, after reading the news v, the individual updates and forms beliefs t=r+k1(-r) where ki is a const ant that equals aton But t his bayesian framework does not allow us to t hink about the media's desire t tell a story. To understand readers demand for "stories", we consider a model where readers t hink in coarse categories rat her that in precise fine-tuned priors (Mullainat ha 2002). Coarse categories capt ure the idea t hat readers carry away general impressions of the sit uat ion rat her than tracking all the det ails. In our simple case of a one- dimensional signal, the coarse categories may be somet hing like "goodand"bad Clinton is eit her a persecuted mo dern man or a villain. Wen Ho Lee is a spy or a victim. In more complicated sit uat ions wit h more dimensions, the categories would be
or use colorful but misleading language and images that support the story. These types of information manipulation need not involve inaccuracies, but at the same time address \the narrative imperative". Modi cation is costly to the newspaper. First, it requires costly story-telling and research necessary to bolster the theme of the report. Second, and far more importantly, both the newspapers and the reporters that work for them care about accuracy, and excessive modi cation of the news raises the risk of being wrong. Let c(n) denote the cost of modifying the news We assume that c(0) = 0 and that sign(c 0(x)) = sign(x) > 0 and c 00(x) = 0, limx!1 c(x) = 1 and limx!0 c(x) = 0. These assumptions mean that manipulation, in either direction, is costly to the newspaper. In the third period, the reader reads the story. He then combines what he reads with his priors to form an assessment of t. De ne this belief to be t^. After beliefs are formed, the reader may forget the story or not. If he remembers the story, he presumes the newspaper is good. If he does not he presumes the paper is bad. 2.1 Reader Psychology The model turns on how we assume readers form beliefs and remember information. At one extreme, we might suppose people form Bayesian beliefs and have perfect recall. In this case, after reading the news , the individual updates and forms beliefs: t^= r + k1( r) where k1 is a constant that equals 2n 2 r+2n . But this Bayesian framework does not allow us to think about the media's desire to tell a story. To understand reader's demand for \stories", we consider a model where readers think in coarse categories rather that in precise ne-tuned priors (Mullainathan 2002). Coarse categories capture the idea that readers carry away general impressions of the situation rather than tracking all the details. In our simple case of a onedimensional signal, the coarse categories may be something like \good" and \bad". Clinton is either a persecuted modern man or a villain. Wen Ho Lee is a spy or a victim. In more complicated situations with more dimensions, the categories would be 6
more nuanced. But the "goodand"bad"in our simple one-dimensional case capt the important feat ure of categoric at ion: readers have coarse rat her than fine-t beliefs.Specifically, define t, and t to be the posit ive and negat ive categories and assume these are sy mmetric in that t=-t6 Denote the categorical thinker'sbeliefs to. We assume that he believes in the category closest to what the Bayesian would believe. In this context. that means that he believes t when the Bayesian would have believed a posit ive tand he chooses t if the Bayesian would have expected a negative t if t> (1) t if te=I For example, suppose the reader has several pieces of ev nce mt which sugg Wen Ho Lee is a spy but some of which suggest the government scape-goated him A categorical t hinker walks away having placed Wen Ho Lee in the spy category, essent ially collapsing his informat ion into this simply summary a key feature of story telling is that stories need to be memorable. To capture this idea, we assume that readers forget some of the stories they read. Specificall re assume t hat the reader selectively forget s information that is inconsistent wit h his category. This select ive recall is an extension of t he reader holding coarse beliefs. He recalls dat a t hat just ify these coarse beliefs. In the above example, once the categorical t hinker places Wen Ho Lee in the spy category, he is less likely to remember stories which suggest t hat the government scapegoated him. Formally, we assume that recall probabilities are a funct ion of consistency wit h t he reader's category after he reads the story. So a story is more likely to be remembered if sign)=signt). specifically inconsistent stories have probability f of being remembered and consistent stories have lowing more categories does not change the "It is worth noting that not every category or story-line is equally likely. The background for any particul ar news item deter hich st ories fit. The t to elucidate exactly how any story is spun, but to underst and how the narr ative imperative inter acts with competition Several psy chology experiments suggest that category consistent information is more likely to be remem bered than category inconsistent inform ation. This is discussed in greater detail in Mullainathan(2002) POne might wonder whether extreme in cosistent stories would al so be remembered. In this set-up, they uld be if they are big h to change the readers category. In this case, they bec me consistent with the new category. If they. simplified, summary world-view of the reader: ader's mind, then they are discarded re inconsistent but not enough to cha since they dont fit
more nuanced. But the \good" and \bad" in our simple one-dimensional case captures the important feature of categorization: readers have coarse rather than ne-tuned beliefs. Speci cally, de ne t+ and t to be the positive and negative categories and assume these are symmetric in that t+ = t.6 Denote the categorical thinker's beliefs to be t^ c. We assume that he believes in the category closest to what the Bayesian would believe. In this context, that means that he believes t+ when the Bayesian would have believed a positive t and he chooses t if the Bayesian would have expected a negative t. Formally: t^ c = 8 >: t+ if t >^ 0 t if t <^ = 0 (1) For example, suppose the reader has several pieces of evidence most of which suggest Wen Ho Lee is a spy but some of which suggest the government scape-goated him. A categorical thinker walks away having placed Wen Ho Lee in the spy category, essentially collapsing his information into this simply summary.7 A key feature of story telling is that stories need to be memorable. To capture this idea, we assume that readers forget some of the stories they read. Speci cally, we assume that the reader selectively forgets information that is inconsistent with his category.8 This selective recall is an extension of the reader holding coarse beliefs. He recalls data that justify these coarse beliefs. In the above example, once the categorical thinker places Wen Ho Lee in the spy category, he is less likely to remember stories which suggest that the government scape-goated him.9 Formally, we assume that recall probabilities are a function of consistency with the reader's category after he reads the story. So a story is more likely to be remembered if sign() = sign(t^ c). Speci cally, inconsistent stories have probability f of being remembered and consistent stories have 6Allowing more categories does not change the results. 7 It is worth noting that not every category or story-line is equally likely. The background for any particular news item determines which stories t. The purpose of our model is not to elucidate exactly how any one story is spun, but to understand how the narrative imperative interacts with competition. 8Several psychology experiments suggest that category consistent information is more likely to be remembered than category inconsistent information. This is discussed in greater detail in Mullainathan (2002). 9One might wonder whether extreme incosistent stories would also be remembered. In this set-up, they would be if they are big enough to change the reader's category. In this case, they become consistent with the new category. If they are inconsistent but not enough to change the reader's mind, then they are discarded since they don't t the simpli ed, summary world-view of the reader. 7
probability 1 of being remembered. Denote this probability of recall as p v, tc In this paper, we examine w hat these two different assumpt ions about reader psy. chology imply for media bias. We consider bot h Bayesian and categorical readers not because we think readers are one or the other type. Instead this split allows us t make clear w hich results are driven by reader psy chology and which are driven by the truct ure of competit ion it self 2.2 Newspaper payoffs A newspapers payoff depends on several factors. First, it depends on whet her the newspaper is perceived to be good, since presumably good newspapers sell better. The paper receives a payoff T if it is t hought to be good and zero ot herwise, where T t he capit alized value of the increment al profits from being remembered. Second, the newspaper may have an ideology T which is either 0, +l or-1. A newspaper wit h an ideology of +l prefers to report posit ive stories whereas a newspaper with an I prefers to report negat ive stories. We assume the newspaper recev ies an benefit equal to BTv. In this sense B measures the int ensity of t he newspaper's ideology We furt her assume that readers form inferences ignoring the newspaper's ideolog o When readers are Bayesian, there is no confusion of good or bad newspapers since stories are remembered. A good newspaper no mat ter w hat it reports has its story remembered and is recognized as good. And by assumption a bad newspaper can never appear good. a good newspaper therefore receives a payoff of BTv-c(n-v) and a bad newspaper receives a payoff of When readers are categorical, however, good newspapers can be confused with bad ones. If a good newspaper's story is forgotten, t hought of bad one This assumption is merely to simplify the calcul ations. At the opposite extreme, readers would know and recognize these ideologies and would de- bi as stories before incorporating them into beliefs. Media biases would have no effect on beliefs at all. Our assumption is a simple version of the more realistic case where readers partly but not fully recognize the bias
probability 1 of being remembered. Denote this probability of recall as (; t^ c). In this paper, we examine what these two di erent assumptions about reader psychology imply for media bias. We consider both Bayesian and categorical readers not because we think readers are one or the other type. Instead this split allows us to make clear which results are driven by reader psychology and which are driven by the structure of competition itself. 2.2 Newspaper Payo s A newspaper's payo depends on several factors. First, it depends on whether the newspaper is perceived to be good, since presumably good newspapers sell better. The paper receives a payo if it is thought to be good and zero otherwise, where is the capitalized value of the incremental pro ts from being remembered. Second, the newspaper may have an ideology which is either 0, +1 or 1. A newspaper with an ideology of +1 prefers to report positive stories whereas a newspaper with an ideology of 1 prefers to report negative stories. We assume the newspaper recevies an ideological bene t equal to . In this sense measures the intensity of the newspaper's ideology. We further assume that readers form inferences ignoring the newspaper's ideology.10 When readers are Bayesian, there is no confusion of good or bad newspapers since all stories are remembered. A good newspaper no matter what it reports has its story remembered and is recognized as good. And by assumption a bad newspaper can never appear good. A good newspaper therefore receives a payo of: + c(n ) and a bad newspaper receives a payo of: c(n ) When readers are categorical, however, good newspapers can be confused with bad ones. If a good newspaper's story is forgotten, it is thought of as a bad one. 10This assumption is merely to simplify the calculations. At the opposite extreme, readers would know and recognize these ideologies and would de-bias stories before incorporating them into beliefs. Media biases would have no e ect on beliefs at all. Our assumption is a simple version of the more realistic case where readers partly but not fully recognize the bias. 8
Readers presume that, since they remember no story, the paper must have been bad ported not hing. A good newspaper's expected payoff therefore depends on the ability of recall in this cas P(v,tc)+BTv-c(n-v) (2) A bad newspaper never confused for a good one. Even when its stories are remem bered they are seen as wort hless. Consequently its payoff is as before Wit h these payoffs, it is clear why categorical thinking provides a non-ideological reason for newspapers to manipulate stories. Newspapers want their stories to orable because the reader who does not remember any story presumes the newspaper to be bad lo To be memorable, a newspaper then has ent ive to alter its story so that it better Sts the readers' category. 1 In the Wen Ho Lee case, unless the newspa- per can change the reader's mind, it has an incentive to report a story consistent with t he readers categorize at ion of Wen Ho Lee as a spy It is wort h not ing that this speciFc mo del is only one way to operat ionalize the lement of reader psy chology we stress. What is crit ical to us is that the reader values stories which mat ch his beliefs except w hen these stories are so large as to change beliefs In our mo del t his preference arises indirect ly because of the different ial memorability of stories, but t here are ot her ways to mo del it. An alternat ive is t hat readers suffer from conBrmatory bias: they dismiss stories that are inconsistent wit h what they believe (Lord, Ross and Lepper 1979). In fact, our model could be reinterpreted in Thus a newspaper's quality (i. e. whether it is good)is assessed solely through recall. We could have allowed quality to be also assessed by how close the newspaper was to the eventual truth, but chose not to for simplicity. All this does is to create an added for ce for the newspaper to reveal its signal with no manipul ation. But in the current mo del, the cost of manipul ating the signal serves the same purpose,li,o worth noting that even if the newspaper is judged only on dist ance from the final truth, it still has a moti. o bAke stories memorable since it receives no credit for being correct if nobody remembers what it reported 1 2One coul d get similar results by making the less drastic assumption that readers"rationally"infer that ht have been good and the ply forgot the story. Even in this case a forgot ten story increases the readers' perceived likelihoo d that the paper is bad and as such hurts its payor 3This could happen through sever al mechanisms. First, editors may use their control to directly spin stories. Second, reporters may respond to editorial or owner preferences by trying to write memor able stories to raise their profile within the paper
Readers presume that, since they remember no story, the paper must have been bad and reported nothing.11 A good newspaper's expected payo therefore depends on the probability of recall in this case: (; t^ c) + c(n ) (2) A bad newspaper is never confused for a good one. Even when its stories are remembered they are seen as worthless. Consequently its payo is as before: c(n ) With these payo s, it is clear why categorical thinking provides a non-ideological reason for newspapers to manipulate stories. Newspapers want their stories to be memorable because the reader who does not remember any story presumes the newspaper to be bad.12 To be memorable, a newspaper then has an incentive to alter its story so that it better ts the readers' category.13 In the Wen Ho Lee case, unless the newspaper can change the reader's mind, it has an incentive to report a story consistent with the reader's categorization of Wen Ho Lee as a spy. It is worth noting that this speci c model is only one way to operationalize the element of reader psychology we stress. What is critical to us is that the reader values stories which match his beliefs except when these stories are so large as to change beliefs. In our model this preference arises indirectly because of the di erential memorability of stories, but there are other ways to model it. An alternative is that readers su er from con rmatory bias: they dismiss stories that are inconsistent with what they believe (Lord, Ross and Lepper 1979). In fact, our model could be reinterpreted in 11Thus a newspaper's quality (i.e. whether it is good) is assessed solely through recall. We could have allowed quality to be also assessed by how close the newspaper was to the eventual truth, but chose not to for simplicity. All this does is to create an added force for the newspaper to reveal its signal with no manipulation. But in the current model, the cost of manipulating the signal serves the same purpose. It is worth noting that even if the newspaper is judged only on distance from the nal truth, it still has a motive to make stories memorable since it receives no credit for being correct if nobody remembers what it reported. 12One could get similar results by making the less drastic assumption that readers \rationally" infer that the paper might have been good and they simply forgot the story. Even in this case a forgotten story increases the readers' perceived likelihood that the paper is bad and as such hurts its payo . 13This could happen through several mechanisms. First, editors may use their control to directly spin stories. Second, reporters may respond to editorial or owner preferences by trying to write memorable stories to raise their pro le within the paper. 9