The Editor vs. the Algorithm: Economic Returns to Data and Externalities in Online News

33 Pages Posted: 12 Nov 2019

See all articles by Jörg Claussen

Jörg Claussen

Ludwig Maximilian University of Munich (LMU) - Faculty of Business Administration (Munich School of Management); Copenhagen Business School - Department of Innovation and Organizational Economics

Christian Peukert

Universidade Catolica Portuguesa; ETH Zurich - Center for Law and Economics

Ananya Sen

Carnegie Mellon University - H. John Heinz III School of Public Policy and Management

Date Written: November 3, 2019

Abstract

We run a field experiment to quantify the economic returns to data and informational externalities associated with algorithmic recommendation in the context of online news. Our results show that personalized recommendation can outperform human curation in terms of user engagement, though this crucially depends on the amount of personal data. Limited individual data or breaking news leads the editor to outperform the algorithm. Additional data helps algorithmic performance but decreasing economic returns set in rapidly. Investigating informational externalities highlights that personalized recommendation reduces consumption diversity. Moreover, users associated with lower levels of digital literacy and more extreme political views engage more with algorithmic recommendations.

Keywords: Field experiment, Economics of AI, Returns to data, Filter Bubbles

Suggested Citation

Claussen, Jörg and Peukert, Christian and Sen, Ananya, The Editor vs. the Algorithm: Economic Returns to Data and Externalities in Online News (November 3, 2019). Available at SSRN: https://ssrn.com/abstract=3479854 or http://dx.doi.org/10.2139/ssrn.3479854

Jörg Claussen

Ludwig Maximilian University of Munich (LMU) - Faculty of Business Administration (Munich School of Management) ( email )

Kaulbachstr. 45
Munich, DE 80539
Germany

Copenhagen Business School - Department of Innovation and Organizational Economics ( email )

Kilevej 14A
Frederiksberg, 2000
Denmark

Christian Peukert

Universidade Catolica Portuguesa ( email )

Lisboa
Portugal

ETH Zurich - Center for Law and Economics ( email )

Rämistrasse 101
ZUE F7
Zürich, 8092
Switzerland

Ananya Sen (Contact Author)

Carnegie Mellon University - H. John Heinz III School of Public Policy and Management ( email )

4800 Forbes Avenue
Pittsburgh, PA Pittsburgh 15213-3890
United States

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