Trade-Offs Between Ranking Objectives: Reduced-Form Evidence and Structural Estimation

Rafael P. Greminger

Papers from arXiv.org

Abstract: Online retailers and platforms typically present alternatives using ranked product lists. By adjusting the ranking, these platforms influence consumers' choices and, in turn, conversions, platform revenues, and consumer welfare. In this paper, I study the trade-offs between ranking algorithms that target these different objectives. First, I highlight and provide reduced-form evidence for a key factor shaping these trade-offs: cross-product heterogeneity in position effects. To quantify the effects of different rankings, I then develop an empirical framework based on the search and discovery model of Greminger (2022). For this framework, I show that the ranking that maximizes conversions also maximizes consumer welfare, implying no trade-off between these two objectives. Moreover, I develop and test a heuristic ranking algorithm to maximize revenues. Finally, I estimate the model and compare the effects of the rankings developed for the different objectives. The results highlight the effectiveness of the different rankings and reveal that the proposed heuristic to maximize revenues also increases consumer welfare, suggesting that the trade-off between revenue maximization and consumer welfare also is limited.

Date: 2022-10, Revised 2025-02
New Economics Papers: this item is included in nep-dcm and nep-pay
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://arxiv.org/pdf/2210.16408 Latest version (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:arx:papers:2210.16408

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().