Competition and Ideological Diversity: Historical Evidence from US Newspapers
We study the competitive forces that shaped ideological diversity in the US press in the early twentieth century. We find that households preferred like-minded news and that newspapers used their political orientation to differentiate from competitors. We formulate a model of newspaper demand, entry, and political affiliation choice in which newspapers compete for both readers and advertisers. We use a combination of estimation and calibration to identify the model's parameters from novel data on newspaper circulation, costs, and revenues. The estimated model implies that competition enhances ideological diversity, that the market undersupplies diversity, and that optimal competition policy requires accounting for the two-sidedness of the news market.
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A data appendix is available at http://www.nber.org/data-appendix/w18234
This paper was revised on September 30, 2013
Document Object Identifier (DOI): 10.3386/w18234
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