Recommendation Service as a Coordination Device among Peers

34 Pages Posted: 17 Apr 2020 Last revised: 4 Sep 2020

See all articles by Elias Carroni

Elias Carroni

University of Bologna - Department of Economics

Giuseppe Pignataro

University of Bologna - Department of Economics

Alessandro Tampieri

University of Florence - Department of Economics and Management; University of Luxembourg

Date Written: March 20, 2020

Abstract

In the classic beauty contest story of Morris and Shin (2002), the coordination game is set exogenously in the payoff function of agents. Our paper studies the existence of endogenous coordination in a context with one seller and many buyers. Due to imperfect information, the seller has an incentive to take a manipulative action to bias the product's quality. We show that a direct relationship between the seller and buyers does not induce them to coordinate to understand the product's value better. Coordination may occur if and only if a platform's intermediation is in place, as its recommendation to buyers unravels the beneficial effects of the others' documentation efforts. The platform's service works as a coordination device among peers. We finally model the combination of private and public signals with a platform's recommendation. The platform can have a preference for a peer-review system or an individual learning strategy, depending on the seller's ability to manipulate.

Keywords: Coordination Games, Recommendation, Platform, Manipulation, Bayesian Learning, Peer-Review.

JEL Classification: D42, D82, D83, L13, M37

Suggested Citation

Carroni, Elias and Pignataro, Giuseppe and Tampieri, Alessandro, Recommendation Service as a Coordination Device among Peers (March 20, 2020). Available at SSRN: https://ssrn.com/abstract=3557876 or http://dx.doi.org/10.2139/ssrn.3557876

Elias Carroni

University of Bologna - Department of Economics ( email )

Bologna
Italy

HOME PAGE: http://https://sites.google.com/site/eliascarroninuoro/

Giuseppe Pignataro (Contact Author)

University of Bologna - Department of Economics ( email )

Piazza Scaravilli, 2
https://www.giuseppepignataro.info
Bologna, Bologna 40122
Italy
3331127342 (Phone)
40126 (Fax)

Alessandro Tampieri

University of Florence - Department of Economics and Management ( email )

Via delle Pandette, 9
Firenze, Florence 50127
Italy

University of Luxembourg ( email )

Avenue de la Faïencerie
162a
Luxembourg City, Luxembourg L-1511
Luxembourg

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