Academic journal article Atlantic Economic Journal

Watchdogs, Platforms and Audience: An Economic Perspective on Media Markets

Academic journal article Atlantic Economic Journal

Watchdogs, Platforms and Audience: An Economic Perspective on Media Markets

Article excerpt


There is a worldwide consensus on the crucial importance of media markets on political, social and economic systems. Media provide and convey content that accounts for a relevant share of individuals' consumption. Media also contribute to the promotion of the consumption of goods and services in general. Additionally, media outlets disclose relevant information that affects the economic and financial decisions of media consumers. Finally, media systems represent important channels through which to build political and social consensus.

Moreover, in recent years, an impressive increase in the number of and range of media outlets has occurred. Broadcast transmission, through cable, satellite and digital means, has dramatically expanded the number of channels available to an audience. The internet, through capitalizing inexpensive channels of information and discussion, has created novel possibilities for the generation and exchange of news. These contributions are expanded when including the convergence between media and telecommunications, which provides a substantial amount of information to an audience on an instantaneous basis. Overall, we can state that the possibility of communication and the speed of the available information have reached a level that would have been unbelievable a few decades ago.

From an economic point of view, there exists a realm of consolidated theoretical and empirical literature called media economics. In this perspective, we would like to focus on economists' point of view in the analysis of media markets. Media economics, in fact, is located in the intersection between the fields of industrial organization, information economics and political economy in a mutually fertile area. However, we believe that it is possible to put together these different components in a single analytical framework, which can be adjusted and refined according to the specific issues that need to be addressed. This general model takes into account three main players, sources, audiences and platforms, and the basic concept of the message as the key object in the correlation between players.

More precisely, we identify three main streams of literature according to the specific correlations among these sets of agents. The first stream focuses on the key role of the platform in the correlation between the audience and advertisers. This approach is known as the two-sided approach. A second stream deserves particular attention regarding the effect of media sources on the audience's decisions, particularly in the voting context. This literature is closely related to the field of political economy and emphasizes the possibility of political parties or lobbies manipulating sources of information to gain electoral consensus. In this respect, we will discuss media bias and media capture. A third approach deals with the sources' competition and the effect of this competition on the audience market. This approach is related to industrial organization literature, analyzing the pricing structure, quantity and accuracy of information. (1)


As stated above, the recent economic literature on media markets is composed of a wide range of variations within a common framework, which we shall call the standard model. Agents in the standard model belong to three types. The first agent type is the receiver (viewer, listener or reader, depending on the medium to which we refer). The population of receivers is referred to as the audience. Receivers face two distinct sets of decisions. The first consists of choosing an action a out of a set A. A can be specified in a number of ways. As a matter of fact, the literature deals either with voting choices (A is the set of alternative candidates, or parties that the individual can support) or with more general resource allocation choices such as an investment, the purchase of a good, etc.

The second set of decisions refers to the media market. …

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