Online Quality with Endogenous Organization

Abstract

This paper investigates how supply-side factors influence the search for quality content in online and offline environments. We show that lower fixed costs of online publishing reduce the incentives to bundle content, as compared to offline journal- ism. Given asymmetric information over journalistic quality, bundling of content by journalists who publish as a group generates positive informational externalities for users. Journalists tend to group assortatively with better journalists having better partners. A consumer who discovers one quality journalist has then found several. The online environment reduces the pressure to group up, leading to fragmentation of journalism outlets. This can lower welfare in our baseline model.

Keywords: media economics, quality, search, links, matching

JEL Classification: L13, L82