Economics of Social Media Fake Accounts

72 Pages Posted: 21 Sep 2022 Last revised: 25 Sep 2022

See all articles by Zihong Huang

Zihong Huang

University of Minnesota - Twin Cities - Carlson School of Management

De Liu

University of Minnesota - Minneapolis

Date Written: August 31, 2022

Abstract

Amid the rise of the influencer economy, fake social media accounts have become a prevalent problem on many social media platforms. Yet the problem of fake accounts is still poorly understood and so is the effectiveness of coping strategies. This research models the ecosystem of fake accounts in an influencer economy and obtains insights on fake-account purchasing behaviors, the impact of anti-fake efforts, and the roles of social media literacy, anti-fake technology, and costs of fake accounts. We show that not only low-quality influencers may buy fake accounts to mimic high-quality ones in a “pooling” equilibrium, high-quality influencers may also buy to prevent mimicry in a “costly-separating” equilibrium. There is also a “naturally-separating” equilibrium where the two types are separated without buying fake accounts. We find that increasing anti-fake efforts and social media literacy may cause more fake accounts. The platform generally prefers either a zero-effort pooling equilibrium or a high-effort naturally-separating equilibrium. Compared to the level of anti-fake efforts preferred by consumers, the platform may be overly or insufficiently aggressive. Some anti-fake strategies, such as increasing social media literacy and fake-account costs, may benefit consumers but not the platform. One exception is increasing the effectiveness of anti-fake technology, which benefits both the platform and consumers and reduces the number of fake accounts.

Keywords: Influencer Economy, Fake Accounts, Social Media, Signaling, Social Media Literacy

Suggested Citation

Huang, Zihong and Liu, De, Economics of Social Media Fake Accounts (August 31, 2022). Available at SSRN: https://ssrn.com/abstract=4206104 or http://dx.doi.org/10.2139/ssrn.4206104

Zihong Huang (Contact Author)

University of Minnesota - Twin Cities - Carlson School of Management ( email )

19th Avenue South
Minneapolis, MN 55455
United States

HOME PAGE: http://zihonghuang.com/

De Liu

University of Minnesota - Minneapolis ( email )

110 Wulling Hall, 86 Pleasant St, S.E.
308 Harvard Street SE
Minneapolis, MN 55455
United States

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