The Informational Role of Online Recommendations: Evidence from a Field Experiment

Abstract

We conduct a field experiment on a movie-recommendation platform to investigate whether and how online recommendations influence consumption choices. Using a within-subjects design, our experiment measures the causal effect of recommendations on consumption and decomposes the relative importance of two economic mechanisms: expanding consumers' consideration sets and providing information about their idiosyncratic match value. We find that the informational component exerts a stronger influence - recommendations shape consumer beliefs, which in turn drive consumption, particularly among less experienced consumers. Our findings and experimental design provide valuable insights for the economic evaluation and optimisation of online recommendation systems.

Figures (12)

• Figure 1: The Impact of Recommendation on Consumption
• Figure 2: Beliefs Explain Consumption: Heterogeneous Effect by Treatment
• Figure 3: Impact of Recommendations on Beliefs: Heterogeneous Effect by Treatment
• Figure 4: Uncertainty by Expected Quality
• Figure 5: MovieLens Home Page