Social Connectedness and the Market for News

This paper introduces a simple market model for news: consumers benefit from and want to share true news and producers incur costs to produce true news. News veracity is endogenous, shaped by the social network. When producer revenues derive from consumers’ viewing stories (e.g., advertising revenue), veracity is low in dense networks, since even false news spreads widely. With revenues from consumers’ actions based on stories (e.g, voting), veracity is higher in dense networks, since consumers make better inferences about news truth. Adding third-party misinformation can increase equilibrium true-news production as consumers respond by being more judicious when sharing stories.

Please sign up for meetings here: