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
Date Written: February 22, 2018
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: Suggested Citation