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Recommendation Service as a Coordination Device among Peers

Author

Listed:
  • Elias Carroni
  • Giuseppe Pignataro
  • Alessandro Tampieri

Abstract

In the classic beauty contest story of Morris and Shin (2002), the coordination game is set exogenously in the payoff function of agents. Our paper studies the existence of endogenous coordination in a context with one seller and many buyers. Due to imperfect information, the seller has an incentive to take a manipulative action to bias the product’s quality. We show that a direct relationship between the seller and buyers does not induce them to coordinate to understand the product’s value better. Coordination may occur if and only if a platform’s intermediation is in place, as its recommendation to buyers unravels the beneficial effects of the others’ documentation efforts. The platform’s service works as a coordination device among peers. We finally model the combination of private and public signals with a platform’s recommendation. The platform can have a preference for a peer-review system or an individual learning strategy, depending on the seller’s ability to manipulate.

Suggested Citation

  • Elias Carroni & Giuseppe Pignataro & Alessandro Tampieri, 2020. "Recommendation Service as a Coordination Device among Peers," Working Papers - Economics wp2020_06.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
    • Handle: RePEc:frz:wpaper:wp2020_06.rdf
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    More about this item

    Keywords

    Coordination Games; Recommendation; Platform; Manipulation; Bayesian Learning; Peer-Review.;
    All these keywords.

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising

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