November 9, 2020, 14:00–15:30
Industrial Organization seminar
We study the effect of Amazon's dual role, as a marketplace and retailer, on product recommendations. We find that products sold by Amazon receive substantially more ``Frequently Bought Together” recommendations across product categories and popularity deciles. To establish causality, we exploit within-product variation generated by Amazon stockouts. We find that when Amazon is out of stock, the identical product sold by third-party sellers receives 8% fewer recommendations. The pattern can be explained by economic incentives of steering and cannot be explained by consumer preference. Furthermore, the steering lowers the recommendation efficiency.