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Inside the Engine Room of Digital Platforms: Reviews, Ratings, and Recommendations

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Abstract

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.

Suggested Citation

  • Paul Belleflamme & Martin Peitz, 2018. "Inside the Engine Room of Digital Platforms: Reviews, Ratings, and Recommendations," AMSE Working Papers 1806, Aix-Marseille School of Economics, Marseille, France.
  • Handle: RePEc:aim:wpaimx:1806
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    Keywords

    platforms; network effects; ratings; recommender systems; digital economics;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

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