Ugo Bolletta : ugo.bolletta[at]univ-amu.fr
Mathieu Faure : mathieu.faure[at]univ-amu.fr
substantial fraction of the online economy is financed by attention: frequently, consumers do not pay for the content they access and, instead, clicks are monetized by content providers (via advertising). We study a novel dynamic principal-agent framework in which the principal (a consumer) decides in each period if she should pay costly attention to the agent (a content provider), privately known to be genuine or fake. Genuine providers choose whether or not to release stochastically arriving content of varying quality whereas "fake news" sources can generate fake news at will. The consumer's payoff depends on the (publicly observed and quality dependent) realized accuracy of the content. Our main result demonstrates how the presence of fake news sources distorts the behavior of genuine content providers: in all equilibria (subject to a mild refinement), both poor quality content (by genuine providers) and fake news (by fake news sources) must occur on path. These distortions are features of the attention economy and do not arise if the principal can commit or use transfers.