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Discussion of Time Scarcity and the Market for News by Larbi Alaoui and Fabrizio Germano Sergei Guriev Oct 29, 2011.

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Presentation on theme: "Discussion of Time Scarcity and the Market for News by Larbi Alaoui and Fabrizio Germano Sergei Guriev Oct 29, 2011."— Presentation transcript:

1 Discussion of Time Scarcity and the Market for News by Larbi Alaoui and Fabrizio Germano Sergei Guriev Oct 29, 2011

2 Summary of the paper A formal model of processing the news stories by readers – and of the strategic ordering of stories by media outlets Reader maximizes news Media outlets maximize readership State of nature: – Newsworthiness of stories on given topics – Content of stories Plays (almost) no role in the current version Potentially helps to understand bias Sergei Guriev

3 Readers Actions: – Read the story – takes time – but adds to total newsworthiness consumed x – Skip (read the title and continue to the next story) – takes less time – Switch to another outlet – also takes some time – Stop reading altogether (if no positive net expected returns to further reading/skipping/switching) By reading or skipping the story, the reader observes newsworthiness hence updates her beliefs about the state of the world – No dynamic inconsistency (Lemmas 1 and 2) – Still, very complex in general case Sergei Guriev

4 Main results General framework is too complex consider specific examples Utilities of news u A (x)=x, u B (x)=2x 2, cubic cost of time – Quadratic utility of B news: returns to specialization rather than diversification – Once already learned something about Blackberry, may be better keep reading about Blackberry rather than switch to iPhone (even if iPhone is better in this state of nature) Sergei Guriev

5 Example #1: Stuck with the wrong story Two states of nature – In the first best, the reader should read only about A in the first state, and – Read only about B in the second state If small switching and skipping costs, the efficient equilibrium is implemented If switching costs are large, may be stuck with the wrong story – Intuitive given the quadratic utility Sergei Guriev

6 Example #1 continued: Reading too much If skipping and switching costs are sufficiently high, the media outlets can order the news so that the readers have to read extra stories (teasers) first – Readers are rationally aware of this – But still prefer this (as are not sure about the true state of the world) Sergei Guriev

7 Example #2: Strategic misordering One state of nature – Better reading one A story than three B stories Low switching costs but high skipping costs Firms strategically make readers start with the wrong stories (B stories) Readers know that A is better but hard to get to A (need to skip three B stories) Competition (due to low switching costs) does not improve things: – Better keep a few readers who read 3 stories each than many readers with one story each A room for a social planner subsidizing readership Sergei Guriev

8 Comments An interesting and realistic general framework Example #2: skipping costs are unrealistically high – Even though opeds are not on the front page, many go straight there How important is ordering at all? – Not just low skipping costs but search Given limited attention span of readers, too many stories in one paper – Better have one effect per paper but analyzed in a general case Sergei Guriev

9 Questions/Suggestions Check the non-media benchmark: imperfect competition model (with switching costs) with convex utility Would prices help? Paid subscription? Repeated game? – Outlets reputation for putting best stories on the front page (or good lead articles in academic journals) Welfare analysis: add up readers and firms payoffs? Social planner aware of the state of nature? Sergei Guriev


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