Media, fake news, and debunking

Abstract

We construct a modified Hotelling-type model of two mediaproviders, each of whom can issue fake and/or real news and eachof whom can invest in the debunking of their rival’s fake news. Themodel assumes that consumers have an innate preference for oneprovider or the other and value real news. However, that valuationvaries according to their bias favouring one provider or the other.We demonstrate a unique subgame perfect Nash equilibrium inwhich only one firm issues fake news and we show, in this setting,that increased polarisation of consumers (represented by a widerdistribution) increases the prevalence of both fake news anddebunking expenditures and is welfare-reducing. We also show,inter alia, that a stronger preference by consumers for theirpreferred provider lowers both fake news and debunking. Finally,we compare monopoly and duopoly market structures in terms of‘fake news’ provision and show that a public news provider can bewelfare-improving. Show more