Aridor, Guy;
Gonçalves, Duarte;
(2022)
Recommenders’ originals: The welfare effects of the dual role of platforms as producers and recommender systems.
International Journal of Industrial Organization
, 83
, Article 102845. 10.1016/j.ijindorg.2022.102845.
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Abstract
We study a model of strategic interaction between a producer and a platform that employs a recommendation system, following an information design approach. Upon entry into the production market, the platform biases recommendations to credibly steer consumers towards its own goods. Despite the increased upstream competition, platform entry and self-preferencing can decrease consumer welfare and result in foreclosure of the independent producer. We then consider the natural policy remedy of separating recommendation and production or imposing unbiased recommendations and find it leads to welfare gains if the platform’s revenue potential is large enough, but to significant welfare losses when it is not. The ambiguity of such a policy’s welfare implications and the dependence on the industry’s returns highlights the importance of targeted restrictions on platform self-preferencing.
| Type: | Article |
|---|---|
| Title: | Recommenders’ originals: The welfare effects of the dual role of platforms as producers and recommender systems |
| Open access status: | An open access version is available from UCL Discovery |
| DOI: | 10.1016/j.ijindorg.2022.102845 |
| Publisher version: | https://doi.org/10.1016/j.ijindorg.2022.102845 |
| Language: | English |
| Additional information: | This version is the author accepted manuscript. For information on re-use, please refer to the publisher’s terms and conditions. |
| Keywords: | Recommender System; Biased Intermediation; Self-Preferencing; Upstream Entry; Information Design |
| UCL classification: | UCL UCL > Provost and Vice Provost Offices > UCL SLASH UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS > Dept of Economics |
| URI: | https://discovery.ucl.ac.uk/id/eprint/10168774 |
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