Essays on Digital Content Provision and Consumption

Abstract

Consumption of digital content has become an inseparable part of consumers' lives today. As providers of digital content, media platforms continuously seek to pursue pricing and product design strategies that increase their profits. This dissertation studies media platforms' digital content provision and consumers' consumption decisions. In the first essay, we focus on the pricing of digital content and analyze the impact of consumers' endogenous content consumption on platforms' paywall strategies. Paywalls increase subscription revenues for platforms, but they also impact content consumption and thus advertising revenues. We build an analytical model that endogenizes consumers' content consumption decisions. We find that under moderate ad rates, a metered paywall under which a limited amount of content is provided for free is optimal when consumers display sufficient heterogeneity in their costs of consuming content. We also study how the amount of free content and the subscription price vary with changes in the advertising rate and consumer preference. In the second essay, we analyze the accuracy of news reported by the news media. When consumers are seeking the truth and accurate reporting is costly, determining the optimal level of accuracy in reporting is a strategic decision for a profit-maximizing media firm. We build an analytical model to study this media firm decision. When consumers and the media firm are both initially uncertain about the true state of the world, we show that the media firm always chooses full accuracy if investigation and reporting are of low cost. However, if achieving accuracy is sufficiently costly, the media firm provides news only when consumers' priors regarding the truth are not too extreme, so that they see enough value in news consumption. Interestingly, consumers' truth-seeking and the firm's profit maximization can lead to reporting inaccuracy and exaggeration of the more likely state a priori. We also discuss the implications of polarization in consumers’ prior beliefs and the media firm’s different objectives on the accuracy of news.