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Media, fake news, and debunking

Author

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  • Ngo Van Long
  • Martin Richardson
  • Frank Stähler

Abstract

We construct a modified Hotelling‐type model of two media providers, each of whom can issue fake and/or real news and each of whom can invest in the debunking of their rival’s fake news. The model assumes that consumers have an innate preference for one provider or the other and value real news. However, that valuation varies according to their bias favouring one provider or the other. We demonstrate a unique subgame perfect Nash equilibrium in which only one firm issues fake news and we show, in this setting, that increased polarisation of consumers (represented by a wider distribution) increases the prevalence of both fake news and debunking expenditures and is welfare‐reducing. We also show, inter alia, that a stronger preference by consumers for their preferred 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 be welfare‐improving.

Suggested Citation

  • Ngo Van Long & Martin Richardson & Frank Stähler, 2019. "Media, fake news, and debunking," The Economic Record, The Economic Society of Australia, vol. 95(310), pages 312-324, September.
    • Handle: RePEc:bla:ecorec:v:95:y:2019:i:310:p:312-324
    DOI: 10.1111/1475-4932.12487
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    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media

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