Endogenous Misinformation and Source Authentication
Oct 7, 2025
We study endogenous information provision and source authentication when secondary senders can copy primary senders' signals, providing a microfoundation for correlation neglect. Authentication mitigates this duplication bias but hinders information diffusion, creating ambiguous effects on misinformation and welfare. Crucially, we show that policies aimed at maximizing user welfare can be fundamentally misaligned with the goal of minimizing misinformation. Non-verification can be optimal when diffusion is highly valued or primary senders hold strong bargaining power. While factors like signal quality reduce misinformation under exogenous verification, the effects are uneven when verification is endogenous. We also examine intellectual property protection and self-regulation, consistently highlighting a core trade-off between information accuracy and diffusion in shaping platform policy and welfare outcomes.