Reputation and news suppression in the media industry

This paper proposes a new argument to explain why media firms silence information and why this behavior may vary across firms and market structures. We build on the literature of career concerns and consider firms that seek to maximize their reputation for high quality. Crucial to our results is the...

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Bibliographic Details
Published in:Games and economic behavior 2020-09, Vol.123, p.240-271
Main Authors: Andina-Díaz, Ascensión, García-Martínez, José A.
Format: Article
Language:English
Subjects:
Endogenous feedback
Market competition
News suppression
Reputation
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Summary:This paper proposes a new argument to explain why media firms silence information and why this behavior may vary across firms and market structures. We build on the literature of career concerns and consider firms that seek to maximize their reputation for high quality. Crucial to our results is the idea that media firms' reporting strategies affect the probability that consumers learn the state of the world. We show that reputational concerns introduce an incentive for firms to withhold scoops and that this incentive is higher in firms with high levels of initial reputation and/or great social influence. We also show that the incentive to withhold information may persist when we consider competition. In particular, we show that sequential competition is not a powerful force towards accuracy; however, simultaneous competition can be. These results suggest that market competition matters for how much information is revealed by firms.
ISSN:0899-8256
1090-2473
DOI:10.1016/j.geb.2020.07.008