News Media as Suppliers of Narratives (and Information)

TL;DR

This paper models how news media influence beliefs through information and narratives, showing that monopolistic and competitive markets can produce biased, polarized beliefs due to narrative strategies and consumer heterogeneity.

Contribution

It introduces a model of media influence that combines signals and narratives, revealing how market structure and consumer diversity affect belief polarization.

Findings

Monopolistic media provide biased, optimistic narratives.

Multiple narratives lead to belief polarization.

Market competition also produces similar effects.

Abstract

We present a model of news media that shape consumer beliefs by providing information (signals about an exogenous state) and narratives (models of what determines outcomes). To amplify consumers' engagement, media maximize consumers' anticipatory utility. Focusing on a class of separable consumer preferences, we show that a monopolistic media platform facing homogenous consumers provides a false "empowering" narrative coupled with an optimistically biased signal. Consumer heterogeneity gives rise to a novel menu-design problem due to a "data externality" among consumers. The optimal menu features multiple narratives and creates polarized beliefs. These effects also arise in a competitive media market model.