Competition Through Recommendations

Robin Ng

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

Abstract: This paper examines how two-sided platforms develop their recommender systems to be precise about value-for-money. On each platform, more precise recommendations generate ranking and screening effects: they steer demand toward high value-for-money products, intensifying price competition among firms which drives out lower-quality firms. Thus, more precise recommendations benefit consumers but reduce platform’s per-transaction revenue. A monopolist platform still prefers precise recommendations, as this expands demand. Competing platforms choose even more precise recommendations. However, when consumers search across platforms or recommender systems are overly complex, recommendations become less precise. This shows that market power is only one potential explanation for 'ensh*ttification'.

Keywords: Digital economy; Recommender systems; Two-sided platforms (search for similar items in EconPapers)
JEL-codes: D21 L10 L86 (search for similar items in EconPapers)
Pages: 41
Date: 2025-12
New Economics Papers: this item is included in nep-com, nep-ind, nep-mic, nep-pay and nep-reg
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.crctr224.de/research/discussion-papers/archive/dp718 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bon:boncrc:crctr224_2025_718

Access Statistics for this paper

More papers in CRC TR 224 Discussion Paper Series from University of Bonn and University of Mannheim, Germany Kaiserstr. 1, 53113 Bonn , Germany.
Bibliographic data for series maintained by CRC Office ().