A Theory of "Likes"

Jean-Michel Benkert and Armin Schmutzler

Papers from arXiv.org

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. We show by which channels a recommendation system influences consumer demand and welfare. Our analysis reveals how the welfare-maximizing design of a recommendation system may differ from what a profit-maximizing designer would choose to do.

Date: 2024-08, Revised 2025-05
New Economics Papers: this item is included in nep-des and nep-mic
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