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Monday, March 25, 2019 at 11:40am to 1:10pm
Uris Hall, 498
David McAdams, Duke University
Social Networks and the Market for News (joint w/Rachel Kranton)
Abstract: This paper builds a simple model of the market for decision-relevant information ("news") and examines how expanding social networks impact producers' incentive to publish true news and consumers' ability to discern what news is true. Having a highly-connected social network reduces producers' incentive to invest in story quality if producers are paid when consumers encounter their stories (our baseline model), but increases their incentive to invest if producers are paid to influence consumer behavior. In either case, consumers' ability to discern the truth is limited in equilibrium, even in the "crowd limit" as each consumer follows infinitely many others. Introducing "fake-news providers" (who can only produce false stories) has an ambiguous equilibrium effect on other news producers, perhaps triggering a downward spiral in news quality or perhaps motivating other producers to invest more in ensuring that their own stories are true. Contemporary news-media markets provide our main motivation, but the model applies more generally to a variety of settings--such as product marketing, charity fundraising, and political campaigns--in which decision-relevant information is shared socially.