Optimizing Click-Through in Online Rankings with Endogenous Search Refinement

46 Pages Posted: 18 Oct 2012 Last revised: 28 Nov 2016

See all articles by Babur De los Santos

Babur De los Santos

Clemson University

Sergei Koulayev

Consumer Financial Protection Bureau

Date Written: July 14, 2016

Abstract

Consumers engage in costly search to evaluate the increasing number of product options available from online retailers. Presenting the best alternatives at the beginning reduces search costs associated with a consumer finding the right product. We use rich data on consumer click-stream behavior from a major web-based hotel comparison platform to estimate a model of search and click. We propose a method of determining the ranking of search results that maximizes consumers' click-through rates (CTRs) based on partial information available to the platform at the time of the consumer request, its assessment of consumers' preferences, and the expected consumer type based on request parameters from the current visit. Our method has two distinct advantages. First, rankings are targeted to anonymous consumers by relating price sensitivity to request parameters, such as the length of stay, number of guests, and day of the week of the stay. Second, we endogenize a consumer response to the ranking through the use of search refinement tools, such as sorting and filtering of product options. Accounting for these search refinement actions is important since the ranking and consumer search actions together shape the consideration set from which clicks are made. We find that predicted CTRs under our proposed ranking are almost double those of the platform's default ranking.

Keywords: consumer search, hotel industry, popularity rankings, platform, collaborative filtering, click-through rates, customization

Suggested Citation

De los Santos, Babur and Koulayev, Sergei, Optimizing Click-Through in Online Rankings with Endogenous Search Refinement (July 14, 2016). Available at SSRN: https://ssrn.com/abstract=2163365 or http://dx.doi.org/10.2139/ssrn.2163365

Babur De los Santos (Contact Author)

Clemson University ( email )

228 Sirrine Hall
Clemson, SC 29634
United States
864-656-3953 (Phone)

HOME PAGE: http://babur.people.clemson.edu

Sergei Koulayev

Consumer Financial Protection Bureau ( email )

United States

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