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Diversity of preferences can increase collective welfare in sequential exploration problems

Abstract · Mar 28, 2017 22:11 ·

cs-ai cs-ma

Arxiv Abstract

  • Pantelis P. Analytis
  • Hrvoje Stojic
  • Alexandros Gelastopoulos
  • Mehdi Moussaïd

We advance a novel model of choice in online interfaces in which agents with diverse yet correlated preferences search the alternatives in order of popularity and choose the first alternative with utility higher than a certain satisficing threshold. The model goes beyond existing accounts in that (i) it suggests a cognitive process through which social influence plays out in these markets (ii) it is bolstered by a rich utility framework and is thus amenable to welfare analysis, and (iii) it facilitates comparisons with scenarios without social influence. Using agent-based simulations we find that social social interaction leads to a larger increase in the average consumer welfare when there is at least some diversity of preferences in the consumer population.

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