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

55 Pages Posted: 12 Nov 2019 Last revised: 12 Jan 2021

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

University of Lausanne (HEC)

Ananya Sen

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

Date Written: January 11, 2021

Abstract

We run a field experiment to quantify the economic returns to data and informational externalities associated with algorithmic recommendation relative to human curation in the context of online news. Our baseline results show that algorithmic recommendation can outperform human curation in terms of user engagement. We find significant heterogeneity with regards to the type of data (personal data is much more effective than aggregate data, but diminishing returns set in quickly), user types (users closer to average consumption patterns engage more), local data network effects (the size of the user base increases engagement only for users close to average consumption patterns), and data freshness (missing updating of personal data quickly deteriorates performance). We characterize circumstances where human curation leads to higher engagement than algorithmic recommendation to highlight complementarities between the human editor and the algorithm. Investigating informational externalities highlights that personalized recommendation reduces consumption diversity and that these are reinforced over time. 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 and the Algorithm: Returns to Data and Externalities in Online News (January 11, 2021). 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

University of Lausanne (HEC) ( email )

Unil Dorigny, Batiment Internef
Lausanne, 1015
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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