Market segmentation in online platforms

Abstract

This paper studies ranking policies in a stylized trial-offer marketplace model, in which a single firm offers multiple products and has consumers who express heterogeneous preferences. Consumer trials are influenced by past purchases, the inherent appeal of the products, and the ranking of each product. Consumer purchases conditional on trying the product are dependent on the inherent quality for the given consumer segment. The platform owner needs to devise a ranking policy to display the products to maximize the number of purchases in the long run, and to decide whether to display the number of past purchases. The model proposed attempts to understand the impact of market segmentation in ..