ABSTRACT

We study an online environment where a firm provides strategic product recommendations to consumers. We develop an analytical framework to integrate recommendations into the consumer search process. The firm sells two imperfectly substitutable products with different profit margins and makes a personalized product recommendation to each consumer based on its uncertainty (lack of knowledge) of his preferences. We define recommendation bias as the firm’s deliberate decision to recommend a product to a consumer that does not minimize expected misfit cost of the consumer. Consumers can accept the product recommendation, search for the nonrecommended product, or leave the website. We identify five consumer segments based on consumers’ responses to the firm’s recommendations. We show that the recommendation bias, profit, and consumer surplus depend on the interaction between the firm’s uncertainty regarding consumer preferences and consumer search costs. A reduction in its uncertainty about consumers leads to a corresponding increase in the firm’s profit but does not necessarily result in a reduction in consumer surplus. An increase in search costs can lead to nonmonotonic changes in the firm’s recommendation strategy, causing an increase or decrease in recommendation bias when the firm’s uncertainty about consumers is low. Furthermore, the firm’s profit can behave non-monotonically with respect to search costs: the firm benefits from an increase in search costs when these costs are small and uncertainty about consumers is low, but it can be adversely affected when search costs are moderate. Interestingly, consumer surplus may increase when search costs increase.

摘要

我们研究了一个公司向消费者提供战略产品推荐的在线环境。我们开发了一个分析框架，将建议集成到消费者搜索过程中。该公司销售两种利润率不同的不完全替代产品，并根据每个消费者偏好的不确定性（缺乏知识）向其推荐个性化的产品。我们定义推荐偏差作为公司向消费者推荐产品的故意决定，并未最大限度地减少消费者的预期不适应成本。消费者可以接受产品推荐、搜索非推荐产品或离开网站。我们根据消费者对公司建议的反应确定了五个消费者群体。我们表明，推荐偏差、利润和消费者剩余取决于公司关于消费者偏好的不确定性和消费者搜索成本之间的相互作用。消费者不确定性的减少会导致公司利润相应增加，但不一定会导致消费者剩余减少。搜索成本的增加可能导致公司推荐策略的非单调变化，当公司对消费者的不确定性较低时，会导致推荐偏差的增加或减少。此外，公司的利润与搜索成本的关系可能是非单调的：当搜索成本很小并且消费者的不确定性很低时，公司会从搜索成本的增加中受益，但当搜索成本适中时，公司可能会受到不利影响。有趣的是，当搜索成本增加时，消费者剩余可能会增加。