Supply-Side Equilibria in Recommender Systems

Algorithmic recommender systems such as Spotify and Netflix affect not only consumer behavior but also . Producers seek to create content that will be shown by the recommendation algorithm, which can impact both the diversity and quality of their content. In this work, we investigate the resulting supply-side equilibria in personalized content recommender systems. We model the decisions of producers as choosing content vectors and users as having preferences, which contrasts with classical low-dimensional models. Multi-dimensionality and heterogeneity creates the potential for, where different producers create different types of content at equilibrium. Using a duality argument, we derive necessary and sufficient conditions for whether specialization occurs. Then, we characterize the distribution of content at equilibrium in concrete settings with two populations of users. Lastly, we show that specialization can enable producers to achieve, which means that specialization can reduce the competitiveness of the marketplace. At a conceptual level, our analysis of supply-side competition takes a step towards elucidating how personalized recommendations shape the marketplace of digital goods.