Herd journalism: Investment in novelty and popularity in markets for news q Benjamin Ho a,⇑ , Peng Liu b a Vassar College, United States b Cornell University, United States article info Article history: Received 21 August 2014 Received in revised form 16 April 2015 Accepted 22 April 2015 Available online 8 May 2015 JEL classification: L82 L86 Keywords: News media Popularity Novelty Cover stories Herd journalism abstract Consumers of news care both about the novelty of the news they read, as well as how pop- ular that news topic is with others. Editors choose what to report on based on consumer preferences and the coverage of their competitors. We build a continuous time model that predicts whether news providers invest in covering novel news stories or instead report on popular. We construct a dataset of cover stories to test the model and find that both nov- elty and popularity are associated with increased sales, but popular stories only have a lifespan of one to two weeks. We find that the impact of novelty has declined since 2006, and the lifespan of a story has shortened. While theory predicts that editors strate- gically alternate between reporting on novel stories and popular stories, we find evidence of positive serial correlation in the popularity of cover stories. Finally, news outlets often cover the same story. Theory predicts that competitive news outlets are more likely to pool on the stories they cover while news outlets with market power are more likely to separate. Ó 2015 Elsevier B.V. All rights reserved. 1. Introduction Consumer preferences for the novelty and the popular- ity of news stories affect the investment decisions by news providers. Editors must decide which news events they should cover, and how that coverage depends on the cov- erage of their competitors. A novel story is characterized as breaking news, a story on a topic about which the news consumer was previously unaware. A popular story is a story that many people already know about due to past coverage by other news outlets. A news story is valuable to consumers both because it provides new information, but also because it provides information that everybody is talking about—i.e. it follows the herd. We show that novel stories and popular stories are associated with higher sales, with the optimal lifespan of a story being just one to two weeks. We model how news firms choose which stories to cover in relation to the novelty and popularity of stories they have covered in the past and in relation to the novelty and popularity of the news covered by their competitors. Our model of news production is a continuous time model where competing news providers make investment decisions about which news events to cover at regular time intervals. Consumers base their consumption decisions on the novelty and the popularity of the stories being offered. We then take the model to the data. The main approach http://dx.doi.org/10.1016/j.infoecopol.2015.04.004 0167-6245/Ó 2015 Elsevier B.V. All rights reserved. q We would like to acknowledge excellent research assistance by Elly Dembo, Andrew Joung, Steve Choi, Haoyu Li, Chris Leung and excellent comments from seminar participants at Cornell, UT Houston, Vassar College and KIEP. Also thanks to discussion from Lisa George and excellent comments from the participants at the Workshop on Media Economics and Public Policy. ⇑ Corresponding author at: 124 Raymond Ave, Poughkeepsie, NY 12604, United States. Tel.: +1 650 867 8270. E-mail address: beho@vassar.edu (B. Ho). Information Economics and Policy 31 (2015) 33–46 Contents lists available at ScienceDirect Information Economics and Policy journal homepage: www.elsevier.com/locate/iep