We study the impact of truthful revelation mechanisms, like fact checking, on the incentives for media outlets to produce misinformation. The existing literature suggests that such interventions will always reduce this incentive. In this paper, we consider a context in which consumers benefit both, and to varying degrees, from the truth contained in news reports and from sharing, discussing, and reacting to news stories that, independent of their truthful content, reinforce and enhance their social identity. In such a setting, we find that truthful revelation will not always decrease, and may in fact increase, the incentives for biased reporting. We identify two distinct mechanisms behind this effect. First, we show that truthful revelation may improve the ability of a biased media outlet to signal its type to consumers. Second, we find that heterogeneous preferences for misinformation endow the outlet with a demand function that may imply an increase or decrease in the incentives to produce biased news due to the stochasticity implied by the fact checking process. Finally, we provide two empirical examples that offer results that are consistent with the idea that media outlets are unlikely to reduce, and may increase, bias when they expect the truth to be revealed imminently. This paper was accepted by Raphael Thomadsen, marketing. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2023.03896 .
David Godes (Tue,) studied this question.