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Economic recommendation with surplus maximization
[working paper]
Corporate Editor
Wissenschaftszentrum Berlin für Sozialforschung gGmbH
Abstract A prime function of many major World Wide Web applications is Online Service Allocation (OSA), the function of matching individual consumers with particular services/goods (which may include loans or jobs as well as products) each with its own producer. In the applications of interest, consumers are... view more
A prime function of many major World Wide Web applications is Online Service Allocation (OSA), the function of matching individual consumers with particular services/goods (which may include loans or jobs as well as products) each with its own producer. In the applications of interest, consumers are free to choose, so OSA usually takes the form of personalized recommendation or search in practice. The performance metrics of recommender and search systems currently tend to focus on just one side of the match, in some cases the consumers (e.g. satisfaction) and in other cases the producers (e.g., profit). However, a sustainable OSA platform needs benefit both consumers and producers; otherwise the neglected party eventually may stop using it. In this paper, we show how to adapt economists' traditional idea of maximizing total surplus (the sum of consumer net benefit and producer profit) to the heterogeneous world of online service allocation, in an effort to promote the web intelligence for social good in online eco-systems. Modifications of traditional personalized recommendation algorithms enable us to apply Total Surplus Maximization (TSM) to three very different types of real-world tasks - e-commerce, P2P lending and freelancing. The results for all three tasks suggest that TSM compares very favorably to currently popular approaches, to the benefit of both producers and consumers.... view less
Keywords
online service; consumption behavior; consumer; decision making; producer; algorithm
Classification
Interactive, electronic Media
National Economy
Free Keywords
Computational Economics; Online Service Allocation; Recommendation Systems; Total Surplus Maximization; Web-based Services
Document language
English
Publication Year
2016
City
Berlin
Page/Pages
16 p.
Series
Discussion Papers / Wissenschaftszentrum Berlin für Sozialforschung, Forschungsschwerpunkt Markt und Entscheidung, Forschungsprofessur Market Design: Theory and Pragmatics, SP II 2016-502
Handle
https://hdl.handle.net/10419/142710
Status
Published Version; reviewed
Licence
Deposit Licence - No Redistribution, No Modifications