Blog Post

The Impact of Online Recommenders: Reinforcing The Head; Facebook Apps As An Example?

An interesting research paper out of Wharton about the effect of online recommendation services and their users and the theory that they tend to drive consumers to concentrate their purchases among popular items rather than allow them to explore and buy whatever piques their curiosity. A write-up about the paper is here on Knowledge@Wharton and the rather technical paper itself is here for download. The authors come to four conclusions:
— “One, some common recommenders lead to a net reduction in average sales diversity. Because common recommenders (e.g., collaborative filters) recommend products based on sales and ratings, they cannot recommend products with limited historical data, even if they would be rated favorably. In turn, these recommenders can create a rich-get-richer effect for popular products and vice-versa for unpopular ones. This finding is often surprising to consumers who express that recommendations have helped them discover new products.
— In line with this, result two shows it is possible for individual-level diversity to increase but aggregate diversity to decrease; recommenders can push each person to new products, but they often push us toward the same new products.
— Result three finds that recommenders intensify the effects of chance events on market outcomes. At the product level, recommenders can