Social Connectedness and Information Markets

Rachel Kranton and David McAdams

American Economic Journal: Microeconomics, 2024, vol. 16, issue 1, 33-62

Abstract: This paper investigates information quality in a simple model of socially connected information markets. Suppliers' payoffs derive from the fraction of consumers who see their stories. Consumers prefer to share and act only on high-quality information. Quality is endogenous and highest when social connectedness is neither too high nor too low. In highly connected markets, low-quality stories are widely seen, giving suppliers little incentive to invest in quality. Increasing the volume of misinformation and increasing consumers' costs of tuning in to suppliers' broadcasts can each increase equilibrium information quality.

JEL-codes: D11 D82 D83 L82 Z13 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (2)

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DOI: 10.1257/mic.20220056

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