Recommendation Power and Competition

Martin Peitz () and Anton Sobolev ()

CRC TR 224 Discussion Paper Series from University of Bonn and University of Mannheim, Germany

Abstract: A firm may decide to make total-surplus-reducing purchase recommendations in response to consumer heterogeneity in an experience good setting. First, we show under which conditions the firm chooses to make such biased recommendations in a monopoly setting. Second, we propose a duopoly model with differentiated products in which single-product firms compete in uniform prices and recommendation policies. We provide conditions under which both firms choose to bias their recommendations, whereas the bias would be absent if products were more differentiated or one of the two products were withdrawn from the market.

Keywords: recommendation bias; recommender system; competition (search for similar items in EconPapers)
JEL-codes: D21 D42 D43 L12 L13 L15 M37 (search for similar items in EconPapers)
Pages: 45
Date: 2025-11
New Economics Papers: this item is included in nep-bec, nep-com, nep-gth, nep-ind, nep-mic and nep-reg
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