Testing the impact of algorithmic rankings on consumer choice
This research shows positive and negative impacts of different algorithmic designs on consumer choice and the economy.
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This report examines the impact of different algorithms on consumer choice in an e-commerce environment, focusing on a hypothetical headphone market.
Through a simulated e-commerce platform, three algorithms were compared to a random ranking:
- a consumer-focused algorithm
- a commercially-focused algorithm
- and an income-based algorithm.
This report provides evidence that the design of algorithms has a significant influence on consumer choice, highlighting the importance of considering consumer preferences in algorithmic rankings. Furthermore, it shows how small variations in algorithm designs had a significant financial impact for consumers, with potential effects on digital markets. This is particularly relevant for vulnerable digital consumers.
By striving for algorithmic transparency and optimising designs, policymakers, regulators, and online platform retailers can foster trust, increase consumer vigilance, and create a fair and efficient online marketplace.
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