Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/300272 
Year of Publication: 
2024
Series/Report no.: 
ZEW Discussion Papers No. 24-045
Publisher: 
ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung, Mannheim
Abstract: 
In this study, we analyze the incentives of a streaming platform to bias consumption when products are vertically differentiated. The platform offers mixed bundles of content to monetize consumer interest in variety and pays royalties to sellers based on the effective consumption of the generated content. When products are not vertically differentiated, the platform has no incentive to bias consumption in equilibrium. With vertical differentiation, royalties can differ, and the platform biases recommendations in favor of the cheapest content, hurting consumers and high-quality sellers. Biased recommendations, if unconstrained, eliminate sellers' incentives to increase the quality of their content, but if constrained, may lead to the inefficient allocation of R&D efforts.
Subjects: 
platform economics
media economics
content aggregator
recommendation bias
innovation
JEL: 
D4
L1
L5
Document Type: 
Working Paper

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