Screening Information

Arrora. Falak
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Arrora. Falak: University of Warwick

The Warwick Economics Research Paper Series (TWERPS) from University of Warwick, Department of Economics

Abstract: How does the presence of fake news affect incentives to acquire legitimate information? I study a model of costly information acquisition where either an honest or a fake sender communicates with a receiver through a platform. The honest sender sends a true but noisy signal, whereas the fake sender sends a false and uninformative signal. The platform can verify the signal’s authenticity; however, it faces a tradeoff. Fake news, although harmful for the receiver, makes her more skeptical and increases the honest sender’s incentives for acquiring more precise information. The platform commits to a policy that indicates the screening probability and a disclosure rule. My central finding is that the screening policy that maximizes the receiver’s welfare often requires tolerating fake news, even when such screening is costless. Moreover, not informing the receiver even when a message has been screened and found to be true is sometimes better than full transparency because it keeps the receiver skeptical.These findings suggest that complete moderation and fact-checking of content may inadvertently leave the receiver worse off.

Keywords: Information acquisition; communication game; fake news; platforms; fact-checking JEL Codes: C72; D82; D83 (search for similar items in EconPapers)
Date: 2025
New Economics Papers: this item is included in nep-dcm, nep-des, nep-gth and nep-mic
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Persistent link: https://EconPapers.repec.org/RePEc:wrk:warwec:1586

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