Demand in mobile application markets and the role of top charts ranking

Abstract In mobile app markets, Top Charts are key recommendation systems, making higher-ranked apps more visible and reducing discovery costs for consumers. I exploit an instrumental variables approach to investigate how changes in app ranking position influence consumers' willingness to download apps. I then explore the impact of app visibility on consumer welfare by simulating scenarios in which the app ranking positions differ from the observed ones. Whilst theory predicts that, if app store rankings were solely determined by factors that correlate strongly with consumer utility, any reordering should lead to welfare losses, this study finds that on Google's Play Store certain changes in ranking position leads to positive welfare gains, suggesting that Google's current ranking system may be based on metrics that do not fully align with consumer preferences. These results contribute to the antitrust and regulatory debate on platforms' influence on consumer behaviour through recommendation systems.