This paper focusses on the information asymmetry in crisis news after a serious incident in Tianjin, China, in 2015. The incident caused enormous damage and resulted in societal unrest because of the lack of reliable information from the formal media channels. Social media — micro blogs —played a major role in reporting on crisis situations. We divided netizens(i.e., the citizens of the net)into high and low types according to their information-critical level to the crisis news. The data shows information deterioration on the crisis news, related to the netizens’ information-critical level. For the traditional media there is the opportunity to use information quality distortion to make more marginal profits. This is possible only if the citizens’ information stays under a certain quality level. The result is overprovision of low quality news and high quality news driven out of the market, whereupon adverse selection(i.e., a lack of symmetric information) appears. However, by adopting a process view, we found self-correcting mechanism(i.e., dying out of rumors) of the social media communities in China.We provided a agent-base model and simulation to show that the more media exist in the market, the faster speed of the information deterioration, but also the capacity to ‘discuss’ rumors.
