Authors: Gonzalo Cisternas and Jorge Vásquez
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Staff Reports
Misinformation in Social Media: The Role of Verification Incentives
Number 1028
August 2022 Revised July 2026
August 2022 Revised July 2026
JEL classification: D40, L10, L50
We develop a model featuring producers of fake news and users who can take incorrect actions linked to fake news exposure, share news items with other users, and verify content at a cost. As users’ sharing and verification choices affect fake news prevalence, they also impact the same choices of other users, and multiple equilibria can arise. Equilibria exhibiting the largest misinformation production and diffusion, and the lowest verification, can maximize user welfare: these conceal lower fake news prevalence, in which case users bear lower verification costs and are lured into wrong actions less frequently. At the core of these findings is that more unverified sharing—the channel through which falsehoods can diffuse—can in fact favor the long-run diffusion of truthful content. Policies targeting verification costs, the lifespan of content, the extent of news certification, and the quality of algorithmic filters are also studied.
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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