Inside the Engine Room of Digital Platforms: Reviews, Ratings, and Recommendations

Working Papers, Aix-Marseille School of Economics, WP 2018 - Nr. 06

35 Pages Posted: 3 Mar 2018

See all articles by Paul Belleflamme

Paul Belleflamme

CORE and Louvain School of Management, UCL (Université Catholique de Louvain); CESifo (Center for Economic Studies and Ifo Institute)

Martin Peitz

University of Mannheim - Department of Economics

Date Written: February 22, 2018

Abstract

The rise and success of digital platforms (such as Airbnb, Amazon, Booking, Expedia, Ebay, and Uber) rely, to a large extent, on their ability to address two major issues. First, to effectively facilitate transactions, platforms need to resolve the problem of trust in the implicit or explicit promises made by the counterparties; they post reviews and ratings to pursue this objective. Second, as platforms operate in marketplaces where information is abundant, they may guide their users towards the transactions that these users may have an interest in; recommender systems are meant to play this role. In this article, we elaborate on review, rating, and recommender systems. In particular, we examine how these systems generate network effects on platforms.

Keywords: platforms, network effects, ratings, recommender systems, digital economics

JEL Classification: D43, L13, L86

Suggested Citation

Belleflamme, Paul and Peitz, Martin, Inside the Engine Room of Digital Platforms: Reviews, Ratings, and Recommendations (February 22, 2018). Working Papers, Aix-Marseille School of Economics, WP 2018 - Nr. 06 . Available at SSRN: https://ssrn.com/abstract=3128141 or http://dx.doi.org/10.2139/ssrn.3128141

Paul Belleflamme (Contact Author)

CORE and Louvain School of Management, UCL (Université Catholique de Louvain) ( email )

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HOME PAGE: http://perso.uclouvain.be/paul.belleflamme/Site/Home.html

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Martin Peitz

University of Mannheim - Department of Economics ( email )

D-68131 Mannheim
Germany
+49 621 181-1835 (Phone)

HOME PAGE: http://peitz.vwl.uni-mannheim.de/

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