Media Competition and the Source of Disagreement

We identify a novel channel through which competition among information providers decreases the efficiency of electoral outcomes. The critical insight we put forward is that the level of competition in the market determines the type of information that is provided in equilibrium. In our model, voters can disagree on which issues are important to them (agenda) and on how each issue in their agenda should be addressed (slant). We show that the level of competition in the market determines how much firms differentiate in terms of the type of information they produce. Importantly, differentiation leads to higher provision of information on issues where there is higher disagreement in the electorate. Although voters become individually better informed, voting decisions shift from focusing on valence issues to ideological issues. On aggregate, the share of votes going to the socially optimal candidate decreases. Our model also highlights how competition in the market for news can have negative welfare consequences even in the absence of behavioral agents or partisan media, therefore offering a new, and to some extent more distressing, perspective on the problem. JEL Classification Numbers: D72, L15, L82.