Economic Theory and Experimental Seminar - Arthur Campbell (Monash University)

Title: News Transmission Through Social Media

Abstract: We develop a dynamic model of social media where there are two types of news content: mass-market and niche-market. There is a continuum of individuals who have tendency to recommend one or other type of news content over the other. In every period each individual makes and receives recommendations to/from their friends. An individual will forward information of corresponding to her own type unless the only content she has received is the other type. We show that there always exists a unique steady-state equilibrium that can be interior (i.e., both types of news prevail) if the society is sufficiently connected or corner (i.e., only mass-market news survives) if the society is not enough connected. We show that homophily aids the niche market and that niche-market individuals consume a greater variety of news content than mass-market individuals. When we consider lobbying groups trying to influence the prevalence of each type of content, we show that the niche-market lobbying group exerts a greater influence on the market. Finally, we allow consumers to choose the degree of homophily amongst their connections and demonstrate that the niche-market individuals exhibit greater homophily than the mass-market consumers.