Contesting fake news

2025-08-27

AI Summary

This paper examines how firms strategically manipulate information to influence the precision of public signals—such as rankings, certifications, or ratings—in markets for credence goods. The core problem is that asymmetric firms jointly determine the discriminatory power of such aggregate labels by selectively releasing or countering rivals’ information, causing signal precision to deviate from the socially optimal level. Methodologically, we develop a sequential contest model grounded in game theory—a “ranking tournament”—to formalize firms’ strategic interactions in information disclosure. Our contributions are threefold: (i) we are the first to model label competition as an endogenous-precision ranking tournament; (ii) we identify a dual manipulation mechanism—“amplification” and “offset”—where firms amplify their own signals while strategically undermining rivals’ information; and (iii) we prove this mechanism universally degrades label precision, thereby impairing consumer decision efficiency. These findings apply broadly to domains relying on third-party signals, including academic evaluation, green certification, film scoring, and financial rating systems.

Technology Category

• Game Theory and Economic Paradigms: Imperfect Information
• Machine Learning: Learning Preferences or Rankings
• Search and Optimization: Evaluation and Analysis

Application Category

• Search and Retrieval-Augmented AI: Web learning to rank, online learning, and counterfactual learning for ranking
• Economics, Online Markets and Human Computation: Fairness, privacy, and diversity in economic environments
• User Modeling, Personalization and Recommendation: Fairness-aware retrieval and ranking

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.

Problem

• Modeling competition in credence goods markets with imperfect quality labels
• Analyzing firms' strategic manipulation of information to influence product rankings
• Examining public good aspects of labels guiding consumer purchasing decisions

Innovation

• Rank-order tournament model for credence goods
• Firms control label precision via information release
• Strategic manipulation of product labeling accuracy