Do Ranking Boosts Harm Consumers and Competition? Indicative Evidence from Online Travel Agencies
Product ranking on online digital platforms are important to consumers, sellers, and platforms. Complex algorithmic ranking systems enable sellers to improve their placements in the platform’s product ranking in exchange for increased commissions.
This article presents two studies of the ranking system of an online travel agency: a descriptive analysis of ranking boosts and a behavioral experiment that compares the effectiveness of price reductions to that of ranking boosts in terms of sales.
In combination, the two analyses suggest that ranking boosts on OTAs are more attractive than discounts, and while consumers benefit directly from price reductions, it is unclear how they would benefit from ranking boosts.
As such, encouraging companies to pay for ranking boosts rather discounting prices may be detrimental to consumers.