Inside the Engine Room of Digital Platforms Reviews Ratings and Recommendations
Reviews, Ratings, and Recommendations: The 3 R's that make digital platforms' engine roar
We have recently written a chapter for the due east-book "Economical Analysis of the Digital Revolution", edited by Juan José Ganuza and Gerard Llobet, and published past Funcas (Madrid). Our affiliate is entitled "Inside the Engine Room of Digital Platforms: Reviews, Ratings, and Recommendations". This post explains what our chapter is about.
Before reading this post, you cannot know whether you will discover information technology interesting, instructive or entertaining (even if you are familiar with the authors' previous work). This post is what economists call an feel skilful, a good whose quality cannot be ascertained before information technology is really consumed. Considering of this uncertainty, you lot may decide not to read information technology and utilize your fourth dimension differently.
This post is published on a platform, IPdigIT. Anticipating the adventure of losing readers, IPdigIT may want to put in place a number of strategies for not losing your custom of reading entries. Starting time, information technology may enquire previous readers to rate and review the post. A loftier boilerplate rating and positive reviews volition lead you to infer that the post is of high quality or is a good fit for your tastes. Also, it may not exist by chance that you came across this post in the first place – you may be brought to this page past a recommender organization, whose artificial intelligence guessed that you would like it (on the ground of your past visits to the platform, of the behavior of readers sharing your tastes, and of the popularity of the mail).
Trust?
Imagine at present that this post is just a way for the authors to introduce themselves in front of readers, who may want to hire them to perform some consultancy work. Beyond providing content, the platform would then also facilitate the interaction between 'buyers' and 'sellers' (i.e., you and usa). Clearly, as a heir-apparent, yous would face an fifty-fifty larger dubiety than you were facing every bit a reader in the previous situation. The key question is: Can you lot trust the states? Even so, the same goes for us: Tin can nosotros trust y'all? In item, you lot would like to exist fairly certain that we will deliver the promised work within the agreed deadline, whereas we would similar to exist guaranteed that you will pay us the agreed fee. If we already had a long-standing business human relationship, mutual trust would take been established by now. But the kind of job we are talking nearly here does not square well with usual business relationships; this is precisely why we are using this platform, equally it attracts many buyers and sellers and, thereby, increases the chances of everyone to find the counterparty they are looking for. Thus, it is of paramount importance for the platform to resolve the trouble of trust. Over again, reviews and ratings are powerful tools to attain this objective. If we intend to employ this platform repeatedly, we will work hard to deliver what you expect from usa, because we count on your positive review and rating to maintain our practiced reputation and, thereby, secure time to come deals. The same applies to yous if the platform allows sellers to evaluate buyers.
Past at present, you should be convinced that ane can hardly understand the functioning of prominent digital platforms, such as Airbnb, Amazon, Booking, Ebay, Google Shopping or Uber, without taking proper account of their "3R systems" (ratings, reviews and recommendations). These systems are crucial for the platforms' performance for a fairly simple reason: potential buyers incur an opportunity cost in evaluating how products and services fare in terms of quality and how they fit their tastes; thus, they appreciate ratings, reviews and recommendations because knowing what other buyers did in the by helps them make better-informed decisions. When two-sidedness is an essential feature of a digital platform, users are ofttimes keen to infer information about the reliability of the counterparties to the transactions that they may conduct on the platform. Here, rating systems tin can possibly steer buyers away from low-quality sellers and can discourage sellers from misbehaving. Conversely, thanks to rating systems, sellers can stay articulate of problematic buyers, and buyers may accept a stronger incentive to behave properly.
In our chapter, we analyze the economic roles that 3R systems play. In particular, nosotros shed low-cal on how the effectiveness of these systems depends on the articulation actions of their users and designers: non just can buyers and sellers take deportment that damage the functioning of 3R systems, but for-profit platforms too may take an incentive to dispense their 3R systems. Finally, nosotros fence that 3R systems are the source of positive network furnishings, every bit their efficiency increases with the number of transactions that the platform manages. These systems are thus, in many cases, a platform'due south fundamental driver in attracting many buyers (and, if applicable, sellers), which is an undeniable source of competitive advantage in markets with competing platforms.
Photograph credits: Photo on VisualHunt
Source: http://www.ipdigit.eu/2018/10/reviews-ratings-and-recommendations-the-3-rs-that-make-digital-platforms-engine-roar/
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