Biased Recommendations and Differentially Informed Consumers

Martin Peitz and Anton Sobolev

No 20368, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We consider a monopolist selling a product to differentially informed consumers: some consumers are uncertain about their tastes, whereas other consumers are perfectly informed. The monopolist sets a uniform price and can make personalized product recommendations. We characterize conditions under which the monopolist biases its recommendations – that is, some consumers with values below the marginal cost follow the recommendation to buy the product or some consumers with values above the marginal cost follow the recommendation not to buy the product.

JEL-codes: D21 D42 L12 L15 M37 (search for similar items in EconPapers)
Date: 2025-06
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