Abstract
This paper develops a location model of media bias in the market for news with a digital intermediary that uses news items as a loss leader for its platform. In the model, media quality is defined as an ability that increases the consumers”utility in interpreting information by better delivering information through news, independent of media bias. The model shows that the digital intermediary minimizes the bias gap between media outlets when its quality is higher than media outlets and maximizes or keeps constant the bias gap otherwise. If the digital intermediary tolerates a decrease in profit, it can maximize or keep constant the bias gap even when its quality is higher than media outlets. Furthermore, the higher its quality relative to media outlets, the lower the media bias adjustment cost.
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