Media Bias and News Customization

In this paper we analyze the effects of news customization (tailoring news to consumers’ political preferences) on media bias. In particular, we extend Hotelling’s duopoly location model to include news customization. Customization occurs when a media firm supplies the market with a continuous line segment of political opinions (i.e.: multi-ideology firm), instead of just a single point on the line (i.e.: single-ideology firm) as in the standard Hotelling model. The customization strategy has some costs related to the adaptation of news to consumers’ political preferences, however, the advantage arises from the possibility to price discriminate between different consumers. In this set up, we show that the possibility to customize news by media firms does not reduce media bias. Accordingly, in order to avoid fierce price competition in the standard segment (which also reduces the revenues from price discrimination in the customized segment), firms decide not to cover a larger variety of political options.