Economics of Social Media Fake Accounts

56 Pages Posted: 21 Sep 2022 Last revised: 7 Dec 2023

See all articles by Zihong Huang

Zihong Huang

Texas Tech University - Rawls College of Business

De Liu

University of Minnesota - Minneapolis

Date Written: December 5, 2023

Abstract

Amid the rise of the influencer economy, fake social media accounts have become prevalent 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 various contextual factors such as social media literacy, the level of anti-fake technology, and the base price of fake accounts. We show that as the anti-fake effort increases, the equilibrium may transition from a “pooling” equilibrium where a low-quality influencer may buy fake accounts to mimic a high-quality one, to a “costly-separating” equilibrium where a high-quality influencer may buy fake accounts to prevent mimicry from a low-quality influencer, and to a “naturally-separating” equilibrium where low- and high-quality influencers are separated without buying fake accounts. We find that increasing anti-fake efforts and increasing social media literacy may sometimes result in more fake accounts. A purely profit-driven platform always prefers a pooling equilibrium with zero anti-fake effort. As a platform puts more weight on consumer welfare, they may exert a positive effort to induce a separating equilibrium but the platform's preferred anti-fake effort tends to be lower than consumers'. We also find that the platform sometimes prefers a lower social media literacy and a lower fake-account base price, whereas consumers prefer the opposite. In contrast, improving the anti-fake technology level can benefit both the platform and consumers.

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

Suggested Citation

Huang, Zihong and Liu, De, Economics of Social Media Fake Accounts (December 5, 2023). Available at SSRN: https://ssrn.com/abstract=4206104 or http://dx.doi.org/10.2139/ssrn.4206104

Zihong Huang (Contact Author)

Texas Tech University - Rawls College of Business ( email )

703 Flint Avenue
Lubbock, TX 79409
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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