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Competing for Recommendations: The Strategic Impact of Personalized Product Recommendations in Online Marketplaces

We study how an online marketplace’s personalized product recommendations and its consumer profiling accuracy affect third-party sellers’ competition and the market outcomes. Sellers strategically adjust prices to compete for the marketplace’s recommendations. As the marketplace more accurately predicts consumers’ preferences, the equilibrium price first decreases and then increases, and both the marketplace’s and the sellers’ profits may decrease despite the improved recommendation accuracy. Moreover, recommending the most profitable product for each recommendation may reduce profits of the marketplace and the sellers, and the marketplace can benefit from excluding pricing information in its recommendation decisions to prevent sellers’ recommendation competition. Counterintuitively, regulations that bar recommendations from considering profit margin information can lead to higher prices and thus harm consumers. These results are driven by competing sellers’ three distinctive incentives: competing for recommendations, exploiting targeted consumers, and undercutting rivals’ prices. We also find that our key insights remain qualitatively unchanged if the marketplace recommends products based on consumer surplus, and the equilibrium price will be lower in comparison. Finally, various extensions demonstrate the robustness of these results.

Ketersediaan

Informasi Detail

Judul Seri

MARKETING SCIENCE; Vol.42 No.2 March-April 2023

No. Panggil

-

Penerbit

: .,

Deskripsi Fisik

p. 360-376

Bahasa

English

ISBN/ISSN

-

Klasifikasi

NONE

Tipe Isi

-

Tipe Media

-

Tipe Pembawa

-

Edisi

-

Subjek

PERSONALIZATION
RECOMMENDATION SYSTEM
SEARCH ENGINE OPTIMIZATION
RETAIL PLATFORM
ONLINE MARKETPLACE
PLATFORM REGULATION
PLATFORM BIAS

Info Detail Spesifik

https://doi.org/10.1287/mksc.2022.1388

Pernyataan Tanggungjawab

Bo Zhou, Tianxin Zou

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