Some Economics of Echo Chambers

Martin Richardson and Frank Stähler

Journal of Institutional and Theoretical Economics (JITE), 2021, vol. 177, issue 2, 205-219

Abstract: This paper analyzes competition between a media firm providing true information (news) and two fake-news providers that create echo chambers. Information from the media firm is uncertain but truthful, and consumers enjoy confirmation of their prior beliefs due to cognitive dissonances. We show that, even if real news is more valued than fake news, entry by fake-news providers becomes more profitable with increased variance of information. Furthermore, a public news provider makes entry for fake-news providers harder than for a profit-maximizing media firm.

Keywords: media; fake news; echo chamber (search for similar items in EconPapers)
JEL-codes: D21 L15 L82 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1628/jite-2021-0004

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