Media Market Structure and Confirmatory News

ABSTRACT This paper studies the effect of media market competition on confirmatory bias, the tendency to confirm common priors to appear competent, while accounting for both single‐ and multi‐homing. It finds that competition helps sustain informative reporting when priors are relatively precise, but has the opposite effect when priors are diffuse. The reason is that when competing outlets are perceived as similarly competent, consumers optimally multi‐home. This creates strategic complementarity in informative reporting and helps sustain it when the priors are relatively precise. However, when perceived competencies diverge, consumers single‐home with the outlet they view as most competent, creating incentives for confirmatory reporting when the priors are diffuse.