Does Competition in News or Information Markets Promote Truth?

The idea that truth prevails, especially in a competitive marketplace of ideas, is an idea that pervaded the minds of contributors to the First Amendment, and is also part of the basic tenants of communication policies in the United States. And let’s not forget it’s an essential foundation to justify and promote freedom of the press.

But market pressures can work to cut back the quality of reporting and editing a media company engages in. Not only that, the market and competition doesn’t prevent falsehoods from persisting for a long time, nor help consumers distinguish between accurate and inaccurate reports. A marketplace of ideas doesn’t necessarily promote truth all the time.

Despite these factors, does competition in the news market work in economical terms?

TL;DR/short-answer is yes, if you focus on soft, fluff lower quality information that caters to consumer desires for such. If you want the money, you give people whatever they want, even if it’s not good for them in the long-term.

A general understanding to support market competition that will end up promoting truth, is that as more points of view are heard, defended or opposed, the arguments and beliefs consumers have will eventually converge towards the truth. This idea is partially removed from the reality of how media organizations actually operate, but it’s always important for them when legal arguments are made to support the notion of a free press. “We need a ‘free press’ to defend ‘truth’!” is somewhat the argument used.

Can competition be increased through increasing the number of independently owned media companies?

Will this limit bias or distortions coming from these media organizations that supply information for consumers to consume?


When do Beliefs Converge Towards the Truth?

Ideally, conflicting points of view from various sources can meet in a debate or argumentation that people can take up for themselves. If people put evidence side-by-side, we tend to think that they will be able to distinguish what is more true and what is less true.

Imagine if each media organization had a separate piece of evidence. The closest to the truth would be most accurate when there are more competitors, and also when the evidence is clear and verifiable.

For this to work, each piece of evidence should be as unique and diverse as possible to introduce new information and not simply a transformation, euphemism, obfuscation or spinning of the information that is known. The diversity or similarity of information will tend to group around geographic, cultural and ideological areas.

A diversity of sources also promotes a reduction in likelihood of making the same error and increases an analysis of that information. This promotes statistical independence of various sources helping to compete towards a better understanding of the truth in reality.

The number of independent sources doesn’t necessarily need to come from or depend upon a number of media companies. Simply adding competitive organizations does nothing to improve a discernment of truth if they all have access to the same source of information. The variability of information will be limited to what that source can provide, and they are all using it to report their stories. A monopolist could take from diverse sources and provide summaries of each for consumers to learn from. This is essentially what reporters and editors are supposed to do.

The interaction between competing media suppliers provides the incentive to collect, verify and report information in order to gain more of the consumers within the competitive market.

Bias from the Media Suppliers

“The press was protected so that it could bare the secrets of government and inform the
people. Only a free and unrestrained press can effectively expose deception in government.

— Hugo Black, New York Times Co. v. United States (403 U.S. 713 [1971])

In some posts on fake news in the media, I’ve mentioned how the media was supposed to be the force that would keep government manipulation and deception in check by reporting what needed to be reported to expose such deception. But this has faded away as their primary goal, as they now seem to collude behind a certain agenda on each political side of the spectrum, more or less with each political government sourced feeds and stories.

One case is of CBS and the abuse by American soldiers in Iraq’s Abu Ghraib prison. CBS obtained photos and video, giving them a huge scoop with devastating political and military implications. To prevent this information from getting out, the Joint Chiefs of Staff personally called CBS anchorman Dan Rather to temporarily suppress the evidence under the justification that it would negatively impact the safety of American hostages in the world.

A similar incident happened in the 1970s with the “Pentagon Papers” that turned into the Watergate scandal. The Nixon administration viewed an internal government history of the Vietnam war as potentially damaging to national security i fit got out to the public. The Justice Department demanded the Times newspaper stopped publishing the Pentagon Papers on the day they first published some of it. The Times refused which brought legal action and a court injunction to halt publication.

Even in so-called “free countries”, with freedom of the press, where this is all supposed to be strongly protected through the Constitution, there are still many ways that the state and government can influence the suppression of information in the press. For CBS, all it took was a phone call, while for the Pentagon papers legal action was employed through their special powers and justifications of national security. In other countries such as Peru, the state has even tried to directly bribe the media in 2004.

Years after the New York Times and Washington Post had published the Watergate affair, Nixon was still trying to punish them by denying their renewal for a television license. Of the 30 Florida television stations that were up for renewal, the only two challenged were those owned by the Washington Post because they did publish more of the Watergate affair while the Times was prevented from doing so.

Competition as a Defense Against Falsity

*The ability to restrict information successfully is dependent upon all information disseminators agreeing to suppress the information. If one single organization reports on a story then people will still learn about it. The more independent media organizations there are, then the more likely it is that at least one of them will choose the benefit of breaking a story over of the possible loss or penalty of government retaliation.

The research paper referenced uses a model that shows the effect of competition on governments capturing media organizations and getting them to comply with restricting information.

Let’s say you have X number of media organizations that have the same damaging story. The story is valued by consumers, and will generate a certain amount of revenue. all the firms that choose to print this story will evenly split all of their revenues amongst each other. The government can try to bribe them all and force them each to make a decision in the moment, about whether to accept the bribe to suppress the story or not. If just one media outlet prints the story then everyone will learn about it anyways.

The more media organizations that exist in the market to release the story, the less likely it is that the story will be suppressed. Competition reduces the probability of suppressing information.

If one media organization prints the story, the value that the government will get by preventing any other organization from printing it drops to zero. This prevents the government from successfully bribing some organizations and not others, which means the government has to bribe everyone for the information to be suppressed. If anyone is not satisfied with the revenue they will get from the bribe offered, they defect and simply release the story which makes the bribe worth nothing for the government to bother paying off any others.

Also, the more media organizations that are successfully bribed and agree to suppress the story, the more of an incentive it is for others to refuse the bribe because they will be the first one to come out with a hot story that will generate even more revenue for them because the other ones chose to not print it and will be late getting the story out.

In the above scenario, each organization has a stake in revealing the truth of the story because it increases their revenue as opposed to staying silent on it. If one media outlet defects, they can capture the entire consumer market for a story and monopolize on the revenue. The more independent media organizations there are, the more difficult it is to suppress information and engage in collusion.

Going back to the Pentagon Papers and the Washington Post, the New York Times was regarded as a more established and respectable paper at the time. But once the courts agreed to muzzle the Times and prevent them from further publishing, the Washington Post took up the exclusive story and was seen as the solitary defender of the freedom of the press to stand for truth against government tyranny. After the Pentagon papers consumers preferred the Washington Post to the New York Times

Diversity in the Market

Even if there is no government trying to manipulate the media, media organizations can have an incentive to not accurately report the truth. There is popular truth and unpopular truth, and sometimes it’s more profitable to keep talking about what’s popular and accepted through the standardized norms of acceptability in a society. Soft, and fluffy info is easier to swallow and is more appealing and attractive to many shallow consumers.

Media organizations that are heavily politically affiliated can pursue ideological agendas as well. This engenders a perceived bias in consumers and is one reason why newspaper readership is low because of the agendas of various mainstream media. The Internet has opened up better sources for people to get that aren’t as biased towards certain political agendas through political party leanings.

In the court case of Associated Press v. United States, 326 U.S. 1 (1945), the case is made for the importance of presenting information from a diversity of all vested interests to represent the truth more accurately.

“That Amendment rests on the assumption that the widest possible dissemination of information from diverse and antagonistic sources is essential to the welfare of the public, that a free press is a condition of a free society.”

When one side of truth as truth is presented it lacks the contrast that the truth of falsity provides to show things for what they are. Looking at the negative shows us the positive in higher contrast and visibility.

A person, such as a politician, or an event that takes place related to them, can be represented favorably in one media outlet, but very unfavorably in another. Or the opposite can happen where an attack is made in one organization against the opposing political agenda to which another media organization will come to the defense of the political ideology that they ally themselves with. Both sides can divulge, suppress or twist facts. But if someone looks at both sources of information, they are more likely to be able to discern what is more accurate through the contrast they both provide.

This has been demonstrated in Milgrom and Roberts (1986) with the “persuasion game”, and with Mullainathan and Shleifer (2005) which sowed that combining sources provides a better assessment of truth, even if both are biased. The more competitors, hopefully the more sources, and the more diversity to catch falsity in contrast to the truth in reality that they should all agree to in common.

Milgrom, Paul, and John Roberts. 1986. “Relying on the Information of Interested Parties.” RAND Journal of Economics, 17(1): 18–32.
Mullainathan, Sendhil, and Andrei Shleifer. 2005. The Market for News. American Economic Review, 95(4): 1031–53.

In the face of repeated facts, biases that repeat falsity can be overcome. The realization that an organization can’t simply continue to pretend there is no evidence to support a claim. To continue to do so is damaging to the reputation of the media organization and will result in the loss of credibility and consumers. If you know some of your consumers will learn the facts from a competitor, then it’s more likely that actions to distort or suppress information will be exposed and this will cost you in revenue. Eventually, truth wins out and the opposition will start reporting on the facts if they want to remain credible at all.

If an organization does not value reputation for reporting truth, then the above does not factor in.

Competition and Investment

Competition is a driving force for media to invest in gathering information before someone else gets it. In the past, carrier pigeons, horses and trains have been used to transmit information. Competition has led to competitors slowing down the competition’s pigeons, out racing horses, and hijacking trains to win being the first to get the big scoop.

The payoff to get the story first has its limits. Once the story breaks it doesn’t take long for it to spread and can be covered by other media outlets. Facts that happen in the world can’t be copyrighted as an exclusive. Getting the scoop to pay-off depends on a consumer’s willingness to pay for that demand. People are willing to pay a lot for the next iPhone or the next generation game console before it comes out officially to the public.


In order to maintain a reputation of providing scoops on information before others have it (or having credibility to promote the truth), an organization is also motivated to invest in gathering information.

Consumer expectation is what drives a purchase. Information goods need to be consumed. We only get a few bits of information in advance through a title, excerpt or newsfeed. This indicates a certain level of comprehension and accuracy of the news coverage which draws us into expecting more information. The entertainment value also factors in to how media outlets deliver their news bits to entice people to tune in or pay for more.

When there is competition, benchmarking and comparison can be done by consumers to judge the quality of the information. This can enhance an organizations incentive to do higher quality reports and stories.

News firms can be categorized into two varieties:

  1. higher-type: always uncover story to print
  2. low-type: has to pay a cost to get certain stories covered

This matters for how consumers see the reputation of the news outlet. If a popular story is covered by another or more media outlets, then consumers can assume the one that doesn’t is a low-type that had additional costs required to cover and out the story in time like the others, or to pay to purchase information at the same time, etc.

For low-type firms to build a reputation for being a high-type, they will try to cover the important and popular stories so that they appear like a major news outlet. If a low- type firm does not invest in uncovering the story, consumers are able to detect that they have no story well competitors do. This is why even for low-type firms, there is an incentive to invest unless the reporting cost is too large and there is no longer an equilibrium between the cost to invest and the revenue from consumers.

When media investigations are gathering information for a story, there is still a timeline pressure to get it out before someone else. Only the first person to get it out can claim to have gathered the information independently rather than simply copying it. The runners up to put out the story afterwards, can have done their own independent information gathering, but they wouldn’t be able to prove it unless they added something new.

Information sources (providing info) that choose certain media outlets over another, will also be doing this based on the skill of reporters and the accuracy, comprehensiveness and quality of analysis that the organization has gained reputation for. When the consumer is evaluating a media organization, the amount of scoops they have to be the first on an important story demonstrates that to those who have exclusive information to provide to media organizations, are trusting certain organizations more than others. By being the first to report on a story implies that you are a higher quality agency.

Competition is well known to affect investment, quality and innovation in economics. Competition in the information market is independent of the products market competition. If there is more competition in the information market, this can tend to increase the incentives to invest in quality. That is if we are only talking about media organization apart from consumer demands.

Competition and Demand-Driven Bias

It is so difficult to draw a clear line of separation between the abuse and the wholesome use of the press, that as yet we have found it better to trust the public judgment, rather than the magistrate, with the discrimination between truth and falsehood. And hitherto the public judgment has performed that office with wonderful correctness.
— Thomas Jefferson (1803)

The public, not the media or the government, is supposed to be the one to engage in judgment and discrimination between the truth or falsity of information presented by the media or government. Things have gone far off track.

In general, competition is effective in reducing distortions of truth because competition becomes more costly if a certain media organization deviates from the desired content of truth, and caring whether it’s suppressed or not. However, if distortions for truth come from consumers themselves then competition has less of an effect on promoting truth.

Leaning Towards Consumer Desires, Demands and Bias

Consumer bias and the desire to confirm prior beliefs is a demand driven bias whereby media organizations will distort information in order to comply with consumer tastes, which further perpetuates an inaccuracy of the veracity of information consumers receive.

Media consumers often prefer like-minded information. This can be demonstrated through favoritism to listen to certain politically leaning news outlets that may not report certain information on corruption by their favorite political party. Reporting on that fact would conflict with the motivations and beliefs of the target audience.

Other news outlets that are for the opposing political party can choose to report the evidence and point out that the competitor suppressed it. Will this change the willingness for consumers to continue to go to the news outlet that leans towards their political party despite not reporting information the damages the party?

A consumer might consciously and willingly trade-off accuracy of a news source because they prefer information that confirms what their previous information is. Consumers will often avoid new sources that challenge but they already think. But there is also a desire for entertainment by going back to sources that confirm that we think about the opposition, as many people like to consume negative stories about the opposition so that they feel they are confirmed in their choice for how “right” and “true” their own political party is. News can be slanted for entertainment, and it can also be a real distortion that’s meant to convey false information to consumers.

Competition turns out to be ineffective in correcting this kind of consumer bias. But media organizations can still put out better sources of information which may influence consumer understanding of what’s going on.

Competition can sometimes lead consumers to self-segregate in order to avoid hearing information that contradicts prior information they accept. The change in information delivery by media organizations since the advent of the Internet has allowed consumers to customize the news and sometimes create an “echo chamber” phenomenon to confirm what we already learned. This inhibits the actual learning process as new information doesn’t come in. Studies have shown that we tend to remember evidence better and rate it higher in quality when it supports what we support. We then tend to infer that sources that match our existing accepted information are more accurate sources.

Contrary to simply confirming what we already accept as the desire and motivation to consume certain news sources, is the desire and motivation for accuracy and quality of truth being given. This is an effective method for competition to lessen distortions of information.

If there was a media organization that had a monopoly and preferred to distort or suppress information in order to appear high quality, competitors that show more accurate information would expose this to consumers and force a reassessment of the quality of the other organization. Media organizations do pay a price when they are shown to have given distorted information.

One example is, Jayson Blair at the New York Times, and Dan Rather at CBS is another more famous example from 2004 which forced him to resign after reporting false information about George W. Bush. To demonstrate how credibility, accuracy and quality of information is important to a media organization, CBS President Andrew Heyward issued an apology and 2004 saying “nothing is more important to [CBS] than our credibility.”

Hard News vs. Soft News

Another demand driven by bias and distortion is that consumers tend to not care for information that matters more. A social planner would consider political information relevant in order to figure out how to make things better in society, whereas an individual person doesn’t seem to care at all about understanding how society functions and how to make things better. In media organizations and news outlets this is demonstrated through a preference to deliver “soft news”, such as on celebrity scandals, as opposed to “hard news” that is more politically and socially relevant to how we all live our lives.

Given this bias, competition to provide the demand for soft news or celebrity scandals will give media organizations the incentive to do just that and give consumers what they want. Social planners and policymakers can tend to disfavor competition in light of this, and have publicly-owned or publicly-“spirited” owners that produce more hard news that matters more to society, than a competitive firm would do by being driven to simply give consumers the fluff that they want.

This doesn’t necessarily work either, as Canada’s CBC is funded by the government and doesn’t want to target the hand that feeds it too harshly. Hence, a reliable portrayal of truth in reality isn’t guaranteed at all under alleged “publicly owned” media organizations that purport to uphold the social good.

Quality news is defined as news primarily for the purpose of providing information, rather than entertainment which would be low-quality news. According to the study, publicly controlled British television is higher quality than privately owned American news competitors. In the most competitive markets, local news quality is the lowest. The more competition there is to cater to consumer tastes tends to also promote soft news and reduce the value of news of a more important nature and higher quality relevance to our lives.

Maintaining the independence of the Free Press can be weighed against under-providing socially valuable and relevant information for our lives. Formulating information delivery for relevant information of higher quality isn’t worth much if hardly any consumers are watching or reading it. There is also a factor of the complexity of the information not being understood by those who do consume it. Jim Lehrer of PBS’s NewsHour delivered high-quality journalism but attracted very few viewers compared to the mainstream media newscasts like Fox news and CNN.

Trying to increase consumption of more relevant and socially desirable news tends to limit the supply of entertaining choices, which is not favorable for many consumers who don’t care about what is going on and just want to be entertained.

Not many people are on the margin of choosing either hard news or soft news, but instead tend to either watch some news or no news at all. They prefer popular entertainment shows instead of entertaining news at all. Due to this consumer bias, increasing quality information can lead to people learning even less due to the competitive market of simply going somewhere else to get the fluff and entertainment that they so much desire.

Competitive media have very strong incentives to package their information delivery in simple and clear ways that are also entertaining which makes them more memorable by being more vivid. Our short attention spans seem to fit into how this works. We want things to continuously captivate our attention at least once every 10 seconds so that we can maintain a focus on it for the one or two minutes of the duration of the segment.

In order to get consumers to actually learn more and improve their level of knowledge and decision-making in society, they would need to actually care to want to receive more relevant and higher quality information.

The example of the publicly-operated British media having better quality news doesn’t mean highly regulated state-run media improves social or political outcomes. More state control of the media in a country tends to go in line with less democratic governments, lower level of press freedom, and worse health outcomes. When political stakes are greater, information tends to be less accurate.

The FCC implemented the “Fairness Doctrine” in order to attempt to ensure that the US media represented a broad spectrum of political viewpoints. The results of trying to force people to cover opposing views that they don’t support, was that radio saw a sharp reduction in political discussion since their freedom to talk about what they want to talk about was being restricted.


The idea of the news market competition as a “marketplace of ideas” is used in opposition to government imposing restraints on the press. Governments often do this when there’s a consolidation of media ownership whereby imposing restraints can be a necessary component to guarantee that competition stays in place and a monopoly does not develop.

Concentration of ownership prevents the public from likely knowing all sides of the controversy. As fewer and fewer hands have control over news source delivery to consumers, there is a form of private censorship that develops.

The free market can generate some competition, but it might not be enough competition to remove distortion of information. The way competition affects performance of a news market is different than how competition effects of traditional economic product markets.

In a product market competition limits the company’s ability to raise the price above the marginal cost if others are doing the same. Collusive monopolies between companies can still be formed if they all agree to raise the prices together.

In an information market, competition usually happens when two or more media organizations cover the same event, or when a consumer learns of information from more than one source even if the two media organizations aren’t looking at each other as direct competition. Continuing to suppress information is too costly if it’s reported by a second. Maintaining a distortion or suppression is even harder now with the Internet as reports are quickly rebroadcast across many different media organizations, whether it’s corporate mainstream or independent grassroots organizations.

In the US, few cities have many competing newspapers and local television and radio stations invest very little in news gathering. All of this has a large effect on consumer knowledge about their society, politics and way of life. Smaller cities had four or five news outlets from newspapers, television or radio stations, while larger cities had 10 or more. Even in smaller cities the competition promotes more entertainment and less quality information for consumers.

A sports competition attracts money because consumers already want that and pay for it. A product or service market will attract money because it’s tailored to a certain consumer base that will buy it. A market for truth and competition for truth in news or information delivery works if the goal is truth, accuracy and quality. It doesn’t work so well if the goal is to cater to popular consumer desires, predilections, and tastes.