News producers’ incentive to invest in news quality increases with the private knowledge of the topic; hence, when information is most needed, the generated news tends to be of lesser quality; & competition does not necessarily improve news quality

Four Things Nobody Tells you About Online News: a Model for the New News Market. Melika Liporace. Bocconi University, October 2021. https://melikaliporace.github.io/research/Liporace_OnlineNewsMarket.pdf

Abstract: Social media create a new type of incentives for news producers. Consumers share content, influence the visibility of articles and determine the advertisement revenues ensuing. I study the new incentives created by sharing and evaluate the potential quality of ad-funded online news. Producers rely on a subset of rational and unbiased consumers to spread news articles. The resulting news has low precision and ambiguous welfare effects. Producers’ incentive to invest in news quality increases with the private knowledge of the topic; hence, when information is most needed, the generated news tends to be of lesser quality. Competition does not necessarily improve news quality – it does so only if the sharing network is sufficiently dense. While ad-funded online news occasionally helps consumers take better decisions, it creates welfare mostly through entertainment. Some interventions, such as flagging wrong articles, substantially improve the outcome; other approaches, such as quality certification, do not.

---

The tragedy of journalists and editors...