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Foreclosure and Exploitation through Recommendation Power

Author

Listed:
  • Jens-Uwe Franck
  • Martin Peitz

Abstract

Recommendation systems create value by reducing search and information costs, but they also give platforms control over visibility and effective access to users. Recommendation power can weaken competitive constraints by distorting competition among offers or by protecting the platform’s gateway position against rival gateways and direct routes to users. It can also be used to extract surplus from end users or business users. We present specific theories of harm for these uses of recommendation power and illustrate them with competition cases. We then discuss how these theories of harm can be assessed empirically, accounting for how market participants respond to recommendation design.

Suggested Citation

  • Jens-Uwe Franck & Martin Peitz, 2026. "Foreclosure and Exploitation through Recommendation Power," CRC TR 224 Discussion Paper Series crctr224_2025_786, University of Bonn and University of Mannheim, Germany.
    • Handle: RePEc:bon:boncrc:crctr224_2025_786
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    File URL: https://www.crctr224.de/research/discussion-papers/archive/dp786
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    JEL classification:

    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law

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