Fake News, Information Herds, Cascades and Economic Knowledge

23 Pages Posted: 26 Jul 2018 Last revised: 3 Aug 2018

See all articles by Lazarina Butkovich

Lazarina Butkovich

California Institute of Technology

Nina Butkovich

California Institute of Technology

Charles R. Plott

California Institute of Technology - Division of the Humanities and Social Sciences

Han Seo

California Institute of Technology

Date Written: July 18, 2018

Abstract

The paper addresses the issue of “fake news” through a well-known and widely studied experiment that illustrates possible uses of economics and game theory for understanding the phenomenon. Public news is viewed as an aggregation of decentralized pieces of valuable information about complex events. Success of news systems rests on accumulated investment in trust in news sources. By contrast, fake news involves cases in which news source reliability is not known. The experiment demonstrates how fake news can destroy both the investment in trust and also the benefits that successful news systems provide.

Keywords: cascades, herds, information aggregation, fake news

JEL Classification: D1, D83, L1, H4, H41, K19, L15, L86, L96

Suggested Citation

Butkovich, Lazarina and Butkovich, Nina and Plott, Charles R. and Seo, Han, Fake News, Information Herds, Cascades and Economic Knowledge (July 18, 2018). Available at SSRN: https://ssrn.com/abstract=3217603 or http://dx.doi.org/10.2139/ssrn.3217603

Lazarina Butkovich

California Institute of Technology

Pasadena, CA 91125
United States

Nina Butkovich

California Institute of Technology

Pasadena, CA 91125
United States

Charles R. Plott (Contact Author)

California Institute of Technology - Division of the Humanities and Social Sciences ( email )

1200 East California Blvd.
337 Baxter Hall
Pasadena, CA 91125
United States
626-395-4209 (Phone)

Han Seo

California Institute of Technology ( email )

Pasadena, CA 91125
United States

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