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Three essays on information and media

Author: Xiang, Yi INSEAD Area: MarketingPublisher: Fontainebleau : INSEAD, 2006.Language: EnglishDescription: 143 p. : Graphs ; 30 cm.Type of document: INSEAD ThesisThesis Note: For the degree of Ph.D. in management, INSEAD, February 2006Bibliography/Index: Includes bibliographical referencesAbstract: The dissertation comprises three chapters, each containing an essay on competition in information and media markets. What connects these markets is that consumers can combine multiple competing products to come to a single product of better quality. This feature creates unusual competitive dynamics between firms. The first essay focuses on the reliability of information goods assuming that the sole utility of information for the buyer is better decision. The second essay examines the bias of information goods in the context of news assuming that consumers consume news for either entertainment or decision making. The third essay empirically tests the core finding from the second essay. More specifically, the first essay studies price setting in information markets with competition on both the buyer and the seller side. Combining the frameworks proposed by Sarvary and Parker (1997) and Iyer and Soberman (2000), the goal is to study the interaction between information quality and the degree of downstream buyer competition in determining equilibrium selling formats and the competitive price of information. The game-theoretic model consists of two information providers selling imperfect information to two competing information buyers and allows for different quality levels as well as varying degrees of buyer competition. I find that previous results on how information quality affects price competition between information sellers are strongly mitigated by the degree of competition oil the buyer side. In particular, stronger buyer competition tends to make information products substitutes leading to stronger seller competition and lower prices for information. Beyond price levels, buyer competition also affects equilibrium selling contracts. In particular, sellers tend to choose exclusive selling contract (sell to one buyer only) when buyer competition is strong, but sell to multiple buyers when buyer competition is moderate or weaker. Finally, it is also found that the quality of information has qualitatively different impacts on sellers' profits, depending on the degree of buyer competition. The second essay studies media bias in the news industry. Traditional economic theories suggest that competition will drive away media bias. The media objectivity argument is built on the assumption that consumers want non-partisan, unbiased information. Following Mullainathan and Schleifer (2005), this essay assumes that some consumers want to read (watch) news that is consistent with their tastes or prior beliefs. However, in contrast to Mullainathan and Schleifer (2005), 1 also assume the presence of conscientious consumers whose sole interest is in knowing the truth. Our game-theoretic model consists of two competing media outlets, selling news to the two kinds of consumers. We find that media bias is a result of consumer heterogeneity and media competition. More importantly, we find that media bias increases when there are more conscientious consumers. However, this increased media bias does not necessarily hurt conscientious consumers who may be able to recover more information. from multiple media outlets, the more these are biased. The third essay empirically tests how media bias changes when there are more/less conscientious consumers in the market, using data from the Pew Research Center for People and Press. I focus on media bias in political news within the cable news industry. Consumers, who cross check media outlets with distinctively different reporting stances, are identified as conscientious. I measure each media outlet's ideological content by the political orientation of those consumers who only believe that medium. Media bias is then measured indirectly through the difference between the ideological contents of media outlets. I test if changes in the proportions of conscientious consumers in the population are related to the changes of media bias across years 2000, 2002 and 2004. 1 find that from 2000 to 2004, more consumers become conscientious in that they cross check between conservative and liberal news programs. Interestingly, I also find that media outlets' news contents become more extreme from 2000 to 2004. The main result support the conclusion in the second essay that media, bias increases when there are more conscientious consumers. List(s) this item appears in: Ph.D. Thesis
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For the degree of Ph.D. in management, INSEAD, February 2006

Includes bibliographical references

The dissertation comprises three chapters, each containing an essay on competition in information and media markets. What connects these markets is that consumers can combine multiple competing products to come to a single product of better quality. This feature creates unusual competitive dynamics between firms. The first essay focuses on the reliability of information goods assuming that the sole utility of information for the buyer is better decision. The second essay examines the bias of information goods in the context of news assuming that consumers consume news for either entertainment or decision making. The third essay empirically tests the core finding from the second essay.
More specifically, the first essay studies price setting in information markets with competition on both the buyer and the seller side. Combining the frameworks proposed by Sarvary and Parker (1997) and Iyer and Soberman (2000), the goal is to study the interaction between information quality and the degree of downstream buyer competition in determining equilibrium selling formats and the competitive price of information. The game-theoretic model consists of two information providers selling imperfect information to two competing information buyers and allows for different quality levels as well as varying degrees of buyer competition. I find that previous results on how information quality affects price competition between information sellers are strongly mitigated by the degree of competition oil the buyer side. In particular, stronger buyer competition tends to make information products substitutes leading to stronger seller competition and lower prices for information. Beyond price levels, buyer competition also affects equilibrium selling contracts. In particular, sellers tend to choose exclusive selling contract (sell to one buyer only) when buyer competition is strong, but sell to multiple buyers when buyer competition is moderate or weaker. Finally, it is also found that the quality of information has qualitatively different impacts on sellers' profits, depending on the degree of buyer competition.
The second essay studies media bias in the news industry. Traditional economic theories suggest that competition will drive away media bias. The media objectivity argument is built on the assumption that consumers want non-partisan, unbiased information. Following Mullainathan and Schleifer (2005), this essay assumes that some consumers want to read (watch) news that is consistent with their tastes or prior beliefs. However, in contrast to Mullainathan and Schleifer (2005), 1 also assume the presence of conscientious consumers whose sole interest is in knowing the truth. Our game-theoretic model consists of two competing media outlets, selling news to the two kinds of consumers. We find that media bias is a result of consumer heterogeneity and media competition. More importantly, we find that media bias increases when there are more conscientious consumers. However, this increased media bias does not necessarily hurt conscientious consumers who may be able to recover more information. from multiple media outlets, the more these are biased.
The third essay empirically tests how media bias changes when there are more/less conscientious consumers in the market, using data from the Pew Research Center for People and Press. I focus on media bias in political news within the cable news industry. Consumers, who cross check media outlets with distinctively different reporting stances, are identified as conscientious. I measure each media outlet's ideological content by the political orientation of those consumers who only believe that medium. Media bias is then measured indirectly through the difference between the ideological contents of media outlets. I test if changes in the proportions of conscientious consumers in the population are related to the changes of media bias across years 2000, 2002 and 2004. 1 find that from 2000 to 2004, more consumers become conscientious in that they cross check between conservative and liberal news programs. Interestingly, I also find that media outlets' news contents become more extreme from 2000 to 2004. The main result support the conclusion in the second essay that media, bias increases when there are more conscientious consumers.

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