Staff Reports
Misinformation in Social Media: The Role of Verification Incentives
Number 1028
August 2022 February 2023

JEL classification: D40, L10, L50

Authors: Gonzalo Cisternas and Jorge Vásquez

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.

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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.
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