Biased recommendations and differentially informed consumers

Abstract We consider a monopolist selling a product to differentially informed consumers: some consumers are uncertain about their tastes, whereas other consumers are perfectly informed. The monopolist sets a uniform price and can make personalized product recommendations. We characterize conditions under which the monopolist biases its recommendations—that is, some consumers with values below the marginal cost follow the recommendation to buy the product or some consumers with values above the marginal cost follow the recommendation not to buy the product.