Report

Misinformation in Social Media: The Role of Verification Incentives

Abstract: We develop a model of a platform featuring producers of fake news as well as users who can share content and verify it at a cost. Since users supply news to other users, their actions affect fake news prevalence and strategic complementarities can arise: high levels of verification can lead to low prevalence of fake content, in turn inducing more unverified sharing that sustains high levels of verification. Equilibria in this market then arise as intersection points between a standard supply curve and a novel correspondence that generalizes a demand function to account for the users’ strategic environment. Equilibria exhibiting more fake news production and diffusion can be consistent with higher user welfare due to the strong verification complementarities at play. We also quantify externalities associated with users affecting the average quality of news items in the platform and examine the effects on outcomes of (i) lowering verification costs, (ii) certifying verified content, and (iii) using algorithmic filters.

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 November 2024.