SSRN Electronic Journal | 2021
How Do Personalized Recommendations Affect Consumer Exploration: A Field Experiment
Abstract
Personalized recommendations are known for their ability to navigate shoppers to the most relevant products first, saving their time. However, the hidden cost is that shoppers are less likely to find other desirable products along the search process serendipitously. Such a potential cost casts doubts on whether websites should adopt personalized recommendations. I suggest a positive spillover effect of gained efficiency from personalized recommendations: consumers explore more because increased search efficiency countervails an increasing opportunity cost of time. In addition, the total shopping time is likely to decrease if efficiency gains prevail over enhanced exploration expectations. I examine these hypotheses empirically using field experiment data from Missfresh, one of China’s biggest grocery delivery platforms. Personalized recommendations enable consumers to reduce the search for essential items, spend more time exploring other categories, and make more purchases while decreasing their total shopping time. These findings are important because they show consumers’ active exploration under time pressure and they demonstrate a demand-increasing mechanism of increasing search efficiency through personalized recommendations.