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Streaming Platform and Strategic Recommendation Bias

Author

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  • Marc Bourreau
  • Germain Gaudin

Abstract

We consider a streaming platform which carries content from various upstream content providers. Participating customers face personalized recommendations from the platform and consume a mix of content originating from each provider. We analyze when the platform uses its personalized recommendation system to steer consumers from one content provider to another. We establish the conditions under which the recommendation system allows the platform to credibly threaten upstream providers to steer consumers away from their content in order to reduce their market power. We find that the streaming platform can increase its profit by reducing the royalty rate it pays to content providers through the use of a recommendation system which is strategically biased in favor of the cheaper content.

Suggested Citation

  • Marc Bourreau & Germain Gaudin, 2018. "Streaming Platform and Strategic Recommendation Bias," CESifo Working Paper Series 7390, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_7390
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    File URL: http://www.cesifo-group.de/DocDL/cesifo1_wp7390.pdf
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    References listed on IDEAS

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    1. Tyner, Wally & Adams, John, 1976. "," 1976 Annual Meeting, August 15-18, State College, Pennsylvania 283822, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    2. Alexandre Cornière & Greg Taylor, 2014. "Integration and search engine bias," RAND Journal of Economics, RAND Corporation, vol. 45(3), pages 576-597, September.
    3. Luis Aguiar & Joel Waldfogel, 2018. "Platforms, Promotion, and Product Discovery: Evidence from Spotify Playlists," JRC Working Papers on Digital Economy 2018-04, Joint Research Centre (Seville site).
    4. J. Yannis Bakos, 1997. "Reducing Buyer Search Costs: Implications for Electronic Marketplaces," Management Science, INFORMS, vol. 43(12), pages 1676-1692, December.
    5. Thomes, Tim Paul, 2013. "An economic analysis of online streaming music services," Information Economics and Policy, Elsevier, vol. 25(2), pages 81-91.
    6. Matthias Hunold & Johannes Muthers, 2017. "Resale price maintenance and manufacturer competition for retail services," RAND Journal of Economics, RAND Corporation, vol. 48(1), pages 3-23, March.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    streaming platform; recommendation system; personalization; bias;

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General

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