Contesting Fake News

This paper introduces a novel type of imperfectly discriminatory contest which endogenizes the cost of compiling the relative ranking it is based on.  As an application, we propose a simple theory of labeling for credence or experience goods of differing qualities.  We model the competition for the first, second, etc. labels as a rank order tournament in which asymmetric firms can jointly control the underlying ranking's precision through the release of individual information.  This information may be interpreted as endogenously established (input for) labeling agencies, experts, or regulatory bodies.  While the labels can be seen as a public good guiding the consumers' purchasing decisions, individual firms have incentives to free-ride on and strategically counteract the competitors' information emissions. The introduced theory seems to be applicable to many industries including politics, advertising, investment rating, the production (and pirating) of computer software, movies, music, etc.