Internet news as a market for lemons
From the translator: The Lemons Market (
Akerlof described the problem of quality uncertainty on the example of the used car market, which presents both good cars and bad ones. Since only the seller knows about the real quality of the car, the buyer cannot give it an adequately high price, respectively, as a maximum, will offer the average. This means that the seller cannot get an adequate high price for his car and, as a result, does not put it on the market at all. However, the phenomenon has other interesting consequences. See here for more details.
====================================
The article considers the problem of news distribution within the framework of the paradigm of the market of lemons, proposed by George Akerlof in 1970. The definition of news as a mechanism that generates universal awareness, as opposed to its entertainment function, makes it possible to understand that instantaneous universal awareness in the context of entanglement and uncertainty of communication methods and realities of life is unattainable. Considering the problem from such an angle, we find its solution, which allows traditional media to carry out their functions, focusing on the role of validation of news, instead of their production. The greatest added value that traditional news media can create is the verification of truth information and a guarantee of quality.
')
Measuring the quality of entertainment is quite simple and self-evident. Consumers instantly determine if the product is entertaining, and continue to pay attention to it if they find it amusing.
News providers seek to serve the entertainment and information needs of the individual with one product at a time. If the quality of the entertainment component of the news to the consumer is easy to assess, then with the assessment of the quality of the information component, everything is much more difficult.
The consumer is faced with the inability to determine whether the news is accurate or true, which corresponds to the situation of information asymmetry.
Despite the availability of a virtually unlimited number of news sources and automatic search systems, the cost of searching for truth is too high. A person is bombarded with information all day, but despite the ease of use of search engines, only 28% of Internet resources are available (Barabasi, 2002). The Internet is growing exponentially, the existing computing power can not reach the most of the network.
Since the media perform the function of a watchdog and controller in a democratic social system, the formation of the market for lemons in relation to news becomes a serious problem that needs to be studied.
It may seem that increasing competition due to independent and unbiased bloggers could improve the quality of the news, but in practice this is not always the case. Without an opportunity to assess the accuracy and quality of information, the Internet news market tends to become a market for lemons.
Schleifer's news market research shows that competition alone is not enough to guarantee the accuracy of the information reported, and that competition not only “leads to low prices, but also to a general bias towards reader bias” (Shleifer and Mullainathan, 2005).
Shleifer believes that “a reader with access to all news sources can form an unbiased point of view,” and that “reader heterogeneity is more important for media accuracy” (2005).
In fact, the problem of the cost of finding information has not been studied, since no reader has time to study all the news sources to form an ideal model of unbiased information.
The problem of assessing the validity of news quality is essentially a problem of the market of lemons raised by Akerlof (Akerlof, 1970). The phenomenon of the market for lemons also deals with “quality and uncertainty,” and the media market is a business in which “trust is important” and, as Akerlof shows, “informal, unsigned guarantees are prerequisites for trade and production,” and “where these guarantees are vague, business will suffer ”(1970).
The purpose of this article is to raise the issue of the market for lemons in relation to Internet news, since the quality of free information splashed out on the Internet is “uncertain”. When the quality of the product is unknown, consumers are willing to pay for it, even assuming that it is unreliable. This displaces the sellers of good goods from the market, because the buyer still can not distinguish the good from the bad.
Akerlof showed the harmful effects of the lemons market on the example of used cars in the 1970s. Then people could not get a decent price for their car and, as a result, refused to sell, leaving only “lemons” on the market, which were already sold as they should. This happens with the market for any product whose quality is uncertain.
The same phenomenon was observed in the mortgage market and can be applied to the media industry, where news is the commodity.
News as a system for people suggests the following utility for them:
The integrity of the narrative itself was recently criticized by Taleb, because it moves the reader to unrealistic risk assessments in financial and other areas of life (Taleb, 2005). Newspapers generally tend to exaggerate or underestimate the risks that an individual faces, and are not sound fuses in terms of risk management.
The quality of a news product is the perception of validity and truth among equal groups that consumers communicate with. Most news consumers want to know what's going on, what's important. Thus, the news performs the function of the caretaker, the observer, the means of fighting corruption and the exchange of true facts of interest to human communities in comparison with the declared values ​​and themes.
The existence of a strong free press is associated with a decrease in the level of corruption in different countries (Brunettia & Wederb, 2003). When researching media companies owned by the state — this is the case in 97% of the countries of the world — it was found that according to “the theory of public choice ... state ownership undermines political and economic freedom” (Schleifer, Djankov, Mcliesh & Menova, 2003) .
In this work, the emphasis is on the non-entertaining component of news as a product. This is consistent with Schleifer's definition that “the quality of [news] information is its accuracy. The more accurate the news, the more valuable their source for the consumer. Pressure from audiences and competitors forces news sources to supply more accurate information. Just as market economy mechanisms encourage automakers to produce better quality cars ”(Shleifer, 2005).
Hamilton's book on the economics of news emphasizes the fact that news is aimed at quick consumption, is an informational product, and is subject to a network effect (Hamilton, 2003).
From Hamilton's point of view, delivery speed, accuracy, and relevance are the desired characteristics of news as a product.
Seen from the outside, news really is a mechanism for creating “universal awareness” in a confusing environment where quality and truth are uncertain.
In this context, the work of Halpern and Moses on artificial intelligence and philosophy would be relevant (Halpern et al, 1984). Halpern and other researchers of general knowledge have found that it is impossible to guarantee the authenticity and truth of universal awareness in real time. The maximum to which an individual can reach here will be almost universal awareness (Halpern ettal, 1994).
Given the complex nature of universal awareness in a distributed and uncertain environment, Halpern and others conclude that time modeling becomes critical in order to achieve ultimate universal awareness. In other words, if a consumer wants universal awareness, he must wait a reasonable amount of time until the news is verified. As Eugene O'Neill would say, instant and true knowledge is only a dream.
One of the side effects of the current situation on the news market is market segmentation by the following groups of people:
I believe that segmentation exists because of the high cost of finding the truth.
Personally, I do not read a lot of news. If I am interested in some topic, I study the whole area of ​​necessary knowledge, get data from experts and draw my own conclusions. But for the majority of citizens, reading news is an invaluable source of information, on the basis of which they build relationships with others, exchange opinions on “really important events”, achieve universal awareness.
Renowned anthropologist Roy Wagner pointed out the pressing information problems that a person faces:
The latter applies to journalism.
Until now, innovations in the news media have concerned either the transformation of traditional media into high-tech companies, which is unlikely, or the transition to a strategy to use niche hyper-local markets.
A model that uses niches and differentiation / specialization has potential, but it is difficult to deal with the problem of changing interest and taste. How does the consumer know which hyper-local news interests him? When time is limited, and there is an active struggle for the user's attention , it is difficult for a hyper-local site to preserve its value for it. Based on this, the option can work when the media is non-commercial and will be supported by the community.
The solution we propose is aimed at larger, well-established media and is a new approach to solving the problem.
Traditional print sources such as the Washington Post have the foundation and reputation of organizations verifying and guaranteeing high quality information. The level of expertise available in print media can be used to validate and verify the authenticity of incoming news, and there is no authority on the Internet to validate news.
One of the innovative solutions to the problem of the market of lemons may be the creation of traditional newspapers blogger space based on reputation, where the news will be checked and validated before publication. This idea is consonant with the work of Yamagishi, who researched the online market for lemons, in which he found that the reputation system was helpful in solving this problem (Yamagishi, 2002).
Yamagishi noted that online commerce deals with “information asymmetry”, which “leads the market to the situation of the market of lemons”. This is similar to the problem of news consumption. Yamagishi divides the reputation into two types: positive and negative. He found that the openness of online commerce prevents negative reputations and "develops positive reputations as an effective means to limit the problem of lemons."
An important aspect of understanding that negative reputation is ineffective on the Internet is the ease of changing and creating a new face. Therefore, for dealing with the problem of lemons, “inclusion” methods are critical, which ensure the validation of a positive reputation.
According to Yamagishi, existing newspapers with a positive brand reputation are valuable as guarantors of a positive reputation on the open news market on the Internet.
A new form of the existence of traditional newspapers can be a hybrid form of an enterprise that is engaged in guaranteeing the quality of news and preserving the ideals of the industry.
The differentiated price will be paid to news companies on the basis of the quality of their verification, and not over the corner of the news or their sensationalism.
With this model, newspapers will specialize by industry according to their expertise and provide objective validation. To ensure true objectivity, the impact of advertising profits will need to be eliminated. Perhaps advertising revenues will be tied to content providers along with payments to authors. Intermediaries who select content based on these quality assessments and after validation will be paid only for the quality of their selection.
A successful example of working with “cyber-lemons” as an “online intermediary” was the largest Chinese trading site C2C, which created a “trust assessment system that became an intermediary in assessing quality and reputation” (Pan, 2005).
In short, a few eBay's for news that specialize in different industries would help solve the problem of lemons.
The newspaper industry must face the process of eliminating intermediaries in determining the content of news broadcasts. The previous model, based on the fact that the agenda is determined by several organizations that exist through advertising, was paternalistic. With the destruction of the intermediary component, the obligation to determine what deserves the attention of people and what does not falls on the shoulders of society. This issue should be best resolved through the education and nurturing of civil and democratic ideals among young people.
About the author: Dhrav Sharma (Dhruv Sharma) is an independent researcher in the field of organizational behavior, risk management, artificial intelligence and systems engineering. A graduate of McIntire School at the University of Virginie, received a Master of Systems Engineering and a Master of Organizational Development at Marymount University.
Special thanks to George Akerlof for an e-mail discussion about the topic and the direction of the search.
This article is dedicated to Emma Brown, a great writer and journalist, and George Akerlof, a great economist.
========================================
– http://onlinejournalismblog.com/2009/12/22/internet-news-as-a-market-for-news-lemons/
, .
lemon - a used car, amer. Diss. ) - the title of economist George Akerlof’s work on information asymmetry, which characterizes a situation where the seller knows more about the product than the buyer. Akerlof, Spence and Stiglitz received the Nobel Prize in economics in 2001 for their research in the field of information asymmetry. Akerlof described the problem of quality uncertainty on the example of the used car market, which presents both good cars and bad ones. Since only the seller knows about the real quality of the car, the buyer cannot give it an adequately high price, respectively, as a maximum, will offer the average. This means that the seller cannot get an adequate high price for his car and, as a result, does not put it on the market at all. However, the phenomenon has other interesting consequences. See here for more details.
====================================
The article considers the problem of news distribution within the framework of the paradigm of the market of lemons, proposed by George Akerlof in 1970. The definition of news as a mechanism that generates universal awareness, as opposed to its entertainment function, makes it possible to understand that instantaneous universal awareness in the context of entanglement and uncertainty of communication methods and realities of life is unattainable. Considering the problem from such an angle, we find its solution, which allows traditional media to carry out their functions, focusing on the role of validation of news, instead of their production. The greatest added value that traditional news media can create is the verification of truth information and a guarantee of quality.
')
“It’s hard to get news from poetry, but people die every day because of what we lack in it.”
William C. Williams
Introduction
Measuring the quality of entertainment is quite simple and self-evident. Consumers instantly determine if the product is entertaining, and continue to pay attention to it if they find it amusing.
News providers seek to serve the entertainment and information needs of the individual with one product at a time. If the quality of the entertainment component of the news to the consumer is easy to assess, then with the assessment of the quality of the information component, everything is much more difficult.
The consumer is faced with the inability to determine whether the news is accurate or true, which corresponds to the situation of information asymmetry.
Despite the availability of a virtually unlimited number of news sources and automatic search systems, the cost of searching for truth is too high. A person is bombarded with information all day, but despite the ease of use of search engines, only 28% of Internet resources are available (Barabasi, 2002). The Internet is growing exponentially, the existing computing power can not reach the most of the network.
Since the media perform the function of a watchdog and controller in a democratic social system, the formation of the market for lemons in relation to news becomes a serious problem that needs to be studied.
It may seem that increasing competition due to independent and unbiased bloggers could improve the quality of the news, but in practice this is not always the case. Without an opportunity to assess the accuracy and quality of information, the Internet news market tends to become a market for lemons.
Schleifer's news market research shows that competition alone is not enough to guarantee the accuracy of the information reported, and that competition not only “leads to low prices, but also to a general bias towards reader bias” (Shleifer and Mullainathan, 2005).
Shleifer believes that “a reader with access to all news sources can form an unbiased point of view,” and that “reader heterogeneity is more important for media accuracy” (2005).
In fact, the problem of the cost of finding information has not been studied, since no reader has time to study all the news sources to form an ideal model of unbiased information.
The problem of assessing the validity of news quality is essentially a problem of the market of lemons raised by Akerlof (Akerlof, 1970). The phenomenon of the market for lemons also deals with “quality and uncertainty,” and the media market is a business in which “trust is important” and, as Akerlof shows, “informal, unsigned guarantees are prerequisites for trade and production,” and “where these guarantees are vague, business will suffer ”(1970).
The purpose of this article is to raise the issue of the market for lemons in relation to Internet news, since the quality of free information splashed out on the Internet is “uncertain”. When the quality of the product is unknown, consumers are willing to pay for it, even assuming that it is unreliable. This displaces the sellers of good goods from the market, because the buyer still can not distinguish the good from the bad.
Akerlof showed the harmful effects of the lemons market on the example of used cars in the 1970s. Then people could not get a decent price for their car and, as a result, refused to sell, leaving only “lemons” on the market, which were already sold as they should. This happens with the market for any product whose quality is uncertain.
The same phenomenon was observed in the mortgage market and can be applied to the media industry, where news is the commodity.
To determine the quality of news and newspapers
News as a system for people suggests the following utility for them:
- connect people and information;
- provide marking (branding) of perceived truth;
- help support democracy and its ideals;
- satisfy people's need for knowledge through the integrity of the story.
The integrity of the narrative itself was recently criticized by Taleb, because it moves the reader to unrealistic risk assessments in financial and other areas of life (Taleb, 2005). Newspapers generally tend to exaggerate or underestimate the risks that an individual faces, and are not sound fuses in terms of risk management.
The quality of a news product is the perception of validity and truth among equal groups that consumers communicate with. Most news consumers want to know what's going on, what's important. Thus, the news performs the function of the caretaker, the observer, the means of fighting corruption and the exchange of true facts of interest to human communities in comparison with the declared values ​​and themes.
The existence of a strong free press is associated with a decrease in the level of corruption in different countries (Brunettia & Wederb, 2003). When researching media companies owned by the state — this is the case in 97% of the countries of the world — it was found that according to “the theory of public choice ... state ownership undermines political and economic freedom” (Schleifer, Djankov, Mcliesh & Menova, 2003) .
Defining the boundaries of news
In this work, the emphasis is on the non-entertaining component of news as a product. This is consistent with Schleifer's definition that “the quality of [news] information is its accuracy. The more accurate the news, the more valuable their source for the consumer. Pressure from audiences and competitors forces news sources to supply more accurate information. Just as market economy mechanisms encourage automakers to produce better quality cars ”(Shleifer, 2005).
Hamilton's book on the economics of news emphasizes the fact that news is aimed at quick consumption, is an informational product, and is subject to a network effect (Hamilton, 2003).
From Hamilton's point of view, delivery speed, accuracy, and relevance are the desired characteristics of news as a product.
Seen from the outside, news really is a mechanism for creating “universal awareness” in a confusing environment where quality and truth are uncertain.
In this context, the work of Halpern and Moses on artificial intelligence and philosophy would be relevant (Halpern et al, 1984). Halpern and other researchers of general knowledge have found that it is impossible to guarantee the authenticity and truth of universal awareness in real time. The maximum to which an individual can reach here will be almost universal awareness (Halpern ettal, 1994).
Given the complex nature of universal awareness in a distributed and uncertain environment, Halpern and others conclude that time modeling becomes critical in order to achieve ultimate universal awareness. In other words, if a consumer wants universal awareness, he must wait a reasonable amount of time until the news is verified. As Eugene O'Neill would say, instant and true knowledge is only a dream.
One of the side effects of the current situation on the news market is market segmentation by the following groups of people:
- people who do not read the news;
- people who read the news to interpret the facts for their activities, such as politicians, lobbyists, etc .;
- people who read what they want to believe and are aware of their choice.
I believe that segmentation exists because of the high cost of finding the truth.
Personally, I do not read a lot of news. If I am interested in some topic, I study the whole area of ​​necessary knowledge, get data from experts and draw my own conclusions. But for the majority of citizens, reading news is an invaluable source of information, on the basis of which they build relationships with others, exchange opinions on “really important events”, achieve universal awareness.
Renowned anthropologist Roy Wagner pointed out the pressing information problems that a person faces:
“Persuasion since the days of Aristotle has never worked as we should, and it has the strongest effect on the persuasive himself ... We live in a world created by unfortunate persuasion, including everything to describe what the global communications industry, media, Internet or web, ubiquitous “sensory” modes and patterns use the code words “information” or “communication” in an attempt to describe what is actually happening.
This means that we live in a world of information-tricks — the half-truths of our lies and half-truths — or what the CIA (or at least its critics) would call disinformation. I'm not kidding, and why should I? Misinformation achieves a far more ambiguous or ambivalent effect than persuasion.
She is both more informative and communicative than any of her fashion surrogates. It works on the “leak principle”. Partial truths have flowed into the stories of well-planned lies, and well-planned lies have been partially truthful. This is motivated by such goals and objectives that have no direct relation to faith or belief on the one hand, nor to doubt and cynicism on the other. It offers deniability on both sides. As Karl Kraus put it: “This is either half or half true.”
On the one hand, we are not convinced (i.e., are indifferent), on the other hand, we are persuaded, and the most difficult thing is in the middle ... Disinformation rules the world, it does this through “denial”. Everyone knows that any transaction, occupation, and especially the profession has its secrets, known to initiates and unknown to others. "(Wagner, 2000)
The latter applies to journalism.
Potential solutions: a new business model for news
Until now, innovations in the news media have concerned either the transformation of traditional media into high-tech companies, which is unlikely, or the transition to a strategy to use niche hyper-local markets.
A model that uses niches and differentiation / specialization has potential, but it is difficult to deal with the problem of changing interest and taste. How does the consumer know which hyper-local news interests him? When time is limited, and there is an active struggle for the user's attention , it is difficult for a hyper-local site to preserve its value for it. Based on this, the option can work when the media is non-commercial and will be supported by the community.
The solution we propose is aimed at larger, well-established media and is a new approach to solving the problem.
Traditional print sources such as the Washington Post have the foundation and reputation of organizations verifying and guaranteeing high quality information. The level of expertise available in print media can be used to validate and verify the authenticity of incoming news, and there is no authority on the Internet to validate news.
One of the innovative solutions to the problem of the market of lemons may be the creation of traditional newspapers blogger space based on reputation, where the news will be checked and validated before publication. This idea is consonant with the work of Yamagishi, who researched the online market for lemons, in which he found that the reputation system was helpful in solving this problem (Yamagishi, 2002).
Yamagishi noted that online commerce deals with “information asymmetry”, which “leads the market to the situation of the market of lemons”. This is similar to the problem of news consumption. Yamagishi divides the reputation into two types: positive and negative. He found that the openness of online commerce prevents negative reputations and "develops positive reputations as an effective means to limit the problem of lemons."
An important aspect of understanding that negative reputation is ineffective on the Internet is the ease of changing and creating a new face. Therefore, for dealing with the problem of lemons, “inclusion” methods are critical, which ensure the validation of a positive reputation.
According to Yamagishi, existing newspapers with a positive brand reputation are valuable as guarantors of a positive reputation on the open news market on the Internet.
A new form of the existence of traditional newspapers can be a hybrid form of an enterprise that is engaged in guaranteeing the quality of news and preserving the ideals of the industry.
The differentiated price will be paid to news companies on the basis of the quality of their verification, and not over the corner of the news or their sensationalism.
With this model, newspapers will specialize by industry according to their expertise and provide objective validation. To ensure true objectivity, the impact of advertising profits will need to be eliminated. Perhaps advertising revenues will be tied to content providers along with payments to authors. Intermediaries who select content based on these quality assessments and after validation will be paid only for the quality of their selection.
A successful example of working with “cyber-lemons” as an “online intermediary” was the largest Chinese trading site C2C, which created a “trust assessment system that became an intermediary in assessing quality and reputation” (Pan, 2005).
In short, a few eBay's for news that specialize in different industries would help solve the problem of lemons.
The newspaper industry must face the process of eliminating intermediaries in determining the content of news broadcasts. The previous model, based on the fact that the agenda is determined by several organizations that exist through advertising, was paternalistic. With the destruction of the intermediary component, the obligation to determine what deserves the attention of people and what does not falls on the shoulders of society. This issue should be best resolved through the education and nurturing of civil and democratic ideals among young people.
About the author: Dhrav Sharma (Dhruv Sharma) is an independent researcher in the field of organizational behavior, risk management, artificial intelligence and systems engineering. A graduate of McIntire School at the University of Virginie, received a Master of Systems Engineering and a Master of Organizational Development at Marymount University.
Special thanks to George Akerlof for an e-mail discussion about the topic and the direction of the search.
This article is dedicated to Emma Brown, a great writer and journalist, and George Akerlof, a great economist.
The following sources were quoted
- Akerlof, GA. (1970) The Market for “Lemons”: Quality Uncertainty and the Market Mechanism. The Quarterly Journal of Economics, Vol. 84, No. 3. (Aug., 1970), pp. 488-500
- Barabási, AL (2002) Linked: The New Science of Networks, Perseus, Cambridge
- Brunettia, Aymo & Wederb, Beatrice (2003) A free press is bad news for corruption. Journal of Public Economics 87 (2003) 1801–1824
- Hamilton, James T., (2003), All the News That's Fit to Sell. Princeton, NJ: Princeton University Press
- Halpern, JY and Moses, Y. (1984). Knowledge and common knowledge in a distributed environment. Journal of the ACM, 37 (3): 549–587, 1990. A preliminary version appeared in Proc. 3rd ACM Symposium on Principles of Distributed Computing
- Halpern, J .; Fagin, R; Moses, Y. and Vardi, MY (1994). Common knowledge revisited. Theoretical aspects of rationality. Proceedings 6th Conference. Retrieved from http://www.cs.cornell.edu/home/halpern/papers/ck_revisited.pdf
- Schleifer, A. Djankov, S., Mcliesh, C. Menova, T. (2003) WHO OWNS THE MEDIA? Journal of Law and Economics. vol. XLVI
- Shleifer, Andrei & Mullainathan, S. (2005) The Market for News. The American Economic Review
- Taleb, NN (2005) “THE OPIATES OF THE MIDDLE CLASSES” Retrieved from http://www.edge.org/3rd_culture/taleb05/taleb05_index.html
- Yamagishi, T. Masafumi, Matsusa. (2002) Improving the Internet Marketing Reporting System. Retrieved from http://joi.ito.com/archives/papers/Yamagishi_ASQ1.pdf Hokkaido University
- Wagner, Roy (2000) “Our Very Own Cargo Cult”. Oceana
========================================
– http://onlinejournalismblog.com/2009/12/22/internet-news-as-a-market-for-news-lemons/
, .
Source: https://habr.com/ru/post/288784/
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