A Theory of Recommendations

Armin Schmutzler Jean-Michel Benkert

Diskussionsschriften from Universitaet Bern, Departement Volkswirtschaft

Abstract: This paper investigates the value of recommendations for disseminating economic information, with a focus on frictions resulting from preference heterogeneity. We consider Bayesian expected-payoff maximizers who receive non-strategic recommendations by other consumers. The paper provides conditions under which different consumer types accept these recommendations. Moreover, we assess the overall value of a recommendation system and the determinants of that value. Our analysis highlights the importance of disentangling objective information from subjective preferences when designing value-maximizing recommendation systems.

Keywords: recommendations; preference heterogeneity; optimal design (search for similar items in EconPapers)
JEL-codes: D02 D47 D83 (search for similar items in EconPapers)
Date: 2024-08
New Economics Papers: this item is included in nep-des and nep-mic
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Persistent link: https://EconPapers.repec.org/RePEc:ube:dpvwib:dp2406

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