Time scarcity and the market for news

We develop a theory of news coverage in environments of information abundance that include both new and traditional news media, from online and print newspapers to radio and television. News consumers are time-constrained and browse through news items that are available across competing outlets, choosing which outlets to access and which stories to read or skip. Media firms are aware of consumers’ preferences and constraints, and decide on rankings of news items that maximize their profits. We find that the news consumed in equilibrium is highly sensitive to the details of the environment. We show that even when readers and outlets are rational and unbiased and when markets are competitive, readers may consume more than they would like to, and the news items they consume may be significantly different from the ones they prefer. Important news items may be crowded out. Next, we derive implications on diverse aspects of current media, including a rationale for tabloid news, a rationale for why readers prefer like-minded news, as well as a theory of optimal advertisement placement in newscasts. We also analyze methods for restoring reader-efficient standards and discuss the political economy implications of the theory.