The Effect of Big Data on Recommendation Quality. The Example of Internet Search

DICE Discussion Paper No. 284

45 Pages Posted: 23 Apr 2018

See all articles by Maximilian Schaefer

Maximilian Schaefer

Yale University - Department of Economics; Alma Mater Studiorum University of Bologna

Geza Sapi

European Commission, DG Competition, Chief Economist's Team; Heinrich Heine University Dusseldorf - Duesseldorf Institute for Competition Economics (DICE)

Szabolcs Lorincz

European Commission, DG Competition, Chief Economist's Team

Date Written: April 3, 2018

Abstract

Are there economies of scale to data in internet search? This paper is first to use real search engine query logs to empirically investigate how data drives the quality of internet search results. We find evidence that the quality of search results improve with more data on previous searches. Moreover, our results indicate that the type of data matters as well: personalized information is particularly valuable as it massively increases the speed of learning. We also provide some evidence that factors not directly related to data such as the general quality of the applied algorithms play an important role. The suggested methods to disentangle the effect of data from other factors driving the quality of search results can be applied to assess the returns to data in various recommendation systems in e-commerce, including product and information search. We also discuss the managerial, privacy, and competition policy implications of our findings.

Keywords: Big Data, Recommendation Quality, Internet Search, E-Commerce, Economies of Scale, Search Engines

JEL Classification: C55, L81, L86, M15

Suggested Citation

Schaefer, Maximilian and Sapi, Geza and Lorincz, Szabolcs, The Effect of Big Data on Recommendation Quality. The Example of Internet Search (April 3, 2018). DICE Discussion Paper No. 284, Available at SSRN: https://ssrn.com/abstract=3149323 or http://dx.doi.org/10.2139/ssrn.3149323

Maximilian Schaefer (Contact Author)

Yale University - Department of Economics ( email )

28 Hillhouse Ave
New Haven, CT 06520-8268
United States

Alma Mater Studiorum University of Bologna ( email )

Bologna
Italy

Geza Sapi

European Commission, DG Competition, Chief Economist's Team ( email )

Place Madou, Madouplein 1
Saint-Josse-ten-Noode/Sint-Joost-ten-Noode
Brussels, B-1049
Belgium

Heinrich Heine University Dusseldorf - Duesseldorf Institute for Competition Economics (DICE) ( email )

Universitaetsstr. 1
Duesseldorf, NRW 40225
Germany

Szabolcs Lorincz

European Commission, DG Competition, Chief Economist's Team ( email )

MADO
Brussels, 1040
Belgium
+32.2.22.99.32.07 (Phone)

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