DP11323 Delegated information choice
|Author(s):||Kristoffer P Nimark, Stefan Pitschner|
|Publication Date:||June 2016|
|Keyword(s):||news media, public information|
|Programme Areas:||Financial Economics, Monetary Economics and Fluctuations|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=11323|
News media provide an editorial service for their audiences by monitoring a large number of events and by selecting the most newsworthy of these to report. Using a Latent Dirichlet Allocation topic model to classify news articles, we document the editorial function of US newspapers. We find that, while different newspapers on average tend to emphasize different topics, news coverage becomes more homogenous across newspapers after major events. We propose a theoretical model that can match these facts. In the model, agents delegate the choice of what to get information about to specialized providers that condition on ex post outcomes before deciding what to report. Because what different information providers choose to report is state dependent, the degree to which information about a given event is common among agents is endogenous and depends both on agents' preferences and the distribution of possible events. If agents have a strategic motive, they respond more strongly to events that they can infer are closer to common knowledge. Because different providers in some states of the world choose to report the same event, agents' actions are more correlated compared to a model in which agents choose ex ante what to get information about.