Contesting fake news

Daniel Rehsmann, B\'eatrice Roussillon and Paul Schweinzer

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Abstract: We model competition on a credence goods market governed by an imperfect label, signaling high quality, as a rank-order tournament between firms. In this market interaction, asymmetric firms jointly and competitively control the aggregate precision of a label ranking the competitors' qualities by releasing individual information. While the labels and the aggregated information they are based on can be seen as a public good guiding the consumers' purchasing decisions, individual firms have incentives to strategically amplify or counteract the competitors' information emission, thereby manipulating the aggregate precision of product labeling, i.e., the underlying ranking's discriminatory power. Elements of the introduced theory are applicable to several (credence-good) industries that employ labels or rankings, including academic departments, ``green'' certification, movies, and investment opportunities.

Date: 2025-08
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