| We study the economic and social consequences of biased news coverage in the public media and evaluate the merits of content regulations designed to curtail such bias. We introduce a general model of the market for news with rational Bayesian consumers and profit-maximizing media outlets in which media bias arises endogenously in equilibrium. Our model is consistent with findings by recent empirical studies that establish relationships between media bias, consumer ideology, and news consumption patterns. It also provides an explanation for the historical variations of the average degree of bias in the U.S. news market based on changes in the cost of news to the consumers and the intensity of competition. Our policy analysis shows that content regulations are never Pareto improving and can sometimes lead to Pareto inferior outcomes. However, we also find that media bias can lead to political polarization and that content regulations can mitigate or exacerbate such polarization under different market conditions. Last, we analyze a simple model with politically motivated media outlets and show that a monopolist would prefer to limit the information it conveys. However, competition between media outlets with opposite objectives ensures that the consumers preferred news reports are produced in equilibrium. |
