Maldonado, Felipe and Van Hentenryck, Pascal and Berbeglia, Gerardo and Berbeglia, Franco (2018) Popularity signals in trial-offer markets with social influence and position bias. European Journal of Operational Research, 266 (2). pp. 775-793. DOI https://doi.org/10.1016/j.ejor.2017.10.056
Maldonado, Felipe and Van Hentenryck, Pascal and Berbeglia, Gerardo and Berbeglia, Franco (2018) Popularity signals in trial-offer markets with social influence and position bias. European Journal of Operational Research, 266 (2). pp. 775-793. DOI https://doi.org/10.1016/j.ejor.2017.10.056
Maldonado, Felipe and Van Hentenryck, Pascal and Berbeglia, Gerardo and Berbeglia, Franco (2018) Popularity signals in trial-offer markets with social influence and position bias. European Journal of Operational Research, 266 (2). pp. 775-793. DOI https://doi.org/10.1016/j.ejor.2017.10.056
Abstract
This paper considers trial-offer markets where consumer preferences are modelled by a multinomial logit with social influence and position bias. The social signal for a product is given by its current market share raised to power r (or, equivalently, the number of purchases raised to the power of r). The paper shows that, when r is strictly between 0 and 1, and a static position assignment (e.g., a quality ranking) is used, the market converges to a unique equilibrium where the market shares depend only on product quality, not their initial appeals or the early dynamics. When r is greater than 1, the market becomes unpredictable. In many cases, the market goes to a monopoly for some product: which product becomes a monopoly depends on the initial conditions of the market. These theoretical results are complemented by an agent-based simulation which indicates that convergence is fast when r is between 0 and 1, and that the quality ranking dominates the well-known popularity ranking in terms of market efficiency. These results shed a new light on the role of social influence which is often blamed for unpredictability, inequalities, and inefficiencies in markets. In contrast, this paper shows that, with a proper social signal and position assignment for the products, the market becomes predictable, and inequalities and inefficiencies can be controlled appropriately.
Item Type: | Article |
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Uncontrolled Keywords: | System dynamics; Social influence; Stochastic dynamics; Robbins–Monro algorithms; Popularity signals; Ranking policies |
Divisions: | Faculty of Science and Health Faculty of Science and Health > Mathematics, Statistics and Actuarial Science, School of |
SWORD Depositor: | Unnamed user with email elements@essex.ac.uk |
Depositing User: | Unnamed user with email elements@essex.ac.uk |
Date Deposited: | 07 Jul 2021 14:36 |
Last Modified: | 30 Oct 2024 16:24 |
URI: | http://repository.essex.ac.uk/id/eprint/30710 |
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