When Competition Deceives: The Fragility of Manipulation

This paper studies how competition can harm consumers when firms compete through deception rather than quality. A continuous-time model describes a duopoly in which each platform chooses between honest and manipulative actions. Manipulation raises perceived quality but fades at a rate that defines its fragility . When deception is durable, rivalry turns into a race to out-manipulate the opponent; when it is fragile, competition moves toward efficiency. In the resulting Markov-perfect equilibrium, welfare depends not on the strength of competition but on its direction. The analysis clarifies when competition benefits consumers and when it deceives them and how policies that increase the fragility of manipulation can restore its constructive role. JEL Codes: D43, L13, D83, D91, L15