Optimal Design for Social Learning
This paper studies the design of a recommender system for organizing social learning on a product. To improve incentives for early experimentation, the optimal design trades oﬀ fully transparent social learning by over-recommending a product (or “spamming”) to a fraction of agents in the early phase of the product cycle. Under the optimal scheme, the designer spams very little about a product right after its release but gradually increases the frequency of spamming and stops it altogether when the product is deemed suﬀiciently unworthy of recommendation. The optimal recommender system involves randomly triggered spamming when recommendations are public — as is often the case for product ratings — and an information “blackout” followed by a burst of spamming when agents can choose when to check in for a recommendation. Fully transparent recommendations may become optimal if a (socially-benevolent) designer does not observe the agents’ costs of experimentation.
Che, Yeon-Koo and Hörner, Johannes, "Optimal Design for Social Learning" (2015). Cowles Foundation Discussion Papers. 2435.