PUB - Publikationen an der Universität Bielefeld

The digital revolution has fundamentally transformed the news industry. To capture these developments, we build a model of media bias in which consumers with heterogeneous beliefs can choose between a variety of news outlets, biased outlets may spread disinformation, and consumers in turn can engage in fact-checking. We first show that fabricated news and fact- checking of counter-attitudinal news naturally is part of any equilibrium. Second, under weak conditions competition between biased outlets induces moderately biased consumers to follow the outlet that is biased against their belief. We also show how competition in many cases reduces disinformation considerably. Finally, in presence of a neutral outlet, echo chambers arise endogenously in equilibrium because only partisans with extreme beliefs follow biased outlets.