Report

Misinformation in Social Media: The Role of Verification Incentives

Abstract: We develop a model in which the prevalence and sharing of misinformation endogenously arise from the interaction between (i) users’ decisions to verify and share news of unknown truthfulness and (ii) producers’ choices to generate fake content. We use the model to examine how policies intended to combat misinformation affect users’ incentives to engage in costly news verification. Via this channel, unintended effects may emerge from: lowering verification costs borne by users; disrupting the supply of fake content; and introducing imperfect filters. We provide sensitivity measures, akin to demand elasticities, to evaluate these effects, and make predictions about market outcomes based on observable characteristics such as users’ age and popularity, as well as deeper parameters such as users’ gains and losses of sharing news.

Keywords: misinformation; news verification; social media;

JEL Classification: D40; L10; L50;

Bibliographic Information

Provider: Federal Reserve Bank of New York

Part of Series: Staff Reports

Publication Date: 2022-08-01

Number: 1028

Note: Revised February 2023.