Authors: Gonzalo Cisternas and Jorge Vásquez
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The New York Innovation Center bridges the worlds of finance, technology, and innovation and generates insights into high-value central bank-related opportunities.
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Staff Reports
Misinformation in Social Media: The Role of Verification Incentives
Number 1028
August 2022 Revised November 2024
August 2022 Revised November 2024
JEL classification: D40, L10, L50
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.
Author Disclosure Statement(s)
Gonzalo Cisternas
I declare that I have no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Jorge Vásquez
I declare that I have no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
I declare that I have no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Jorge Vásquez
I declare that I have no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
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