E-commerce Recommendation with Weighted Expected Utility

TL;DR

This paper introduces a new e-commerce recommendation framework based on Weighted Expected Utility, modeling consumer satisfaction and accounting for psychological biases, leading to improved recommendation accuracy.

Contribution

It proposes a novel recommendation approach using Weighted Expected Utility that incorporates psychological biases via Probability Weight Function, outperforming existing models.

Findings

Significant improvement over classical collaborative filtering methods.

Outperforms state-of-the-art deep learning models in top-K recommendation.

Effectiveness demonstrated on real-world e-commerce datasets.

Abstract

Different from shopping at retail stores, consumers on e-commerce platforms usually cannot touch or try products before purchasing, which means that they have to make decisions when they are uncertain about the outcome (e.g., satisfaction level) of purchasing a product. To study people's preferences, economics researchers have proposed the hypothesis of Expected Utility (EU) that models the subject value associated with an individual's choice as the statistical expectations of that individual's valuations of the outcomes of this choice. Despite its success in studies of game theory and decision theory, the effectiveness of EU, however, is mostly unknown in e-commerce recommendation systems. Previous research on e-commerce recommendation interprets the utility of purchase decisions either as a function of the consumed quantity of the product or as the gain of sellers/buyers in the monetary sense. As most consumers just purchase one unit of a product at a time and most alternatives have similar prices, such modeling of purchase utility is likely to be inaccurate in practice. In this paper, we interpret purchase utility as the satisfaction level a consumer gets from a product and propose a recommendation framework using EU to model consumers' behavioral patterns. We assume that consumer estimates the expected utilities of all the alternatives and choose products with maximum expected utility for each purchase. To deal with the potential psychological biases of each consumer, we introduce the usage of Probability Weight Function (PWF) and design our algorithm based on Weighted Expected Utility (WEU). Empirical study on real-world e-commerce datasets shows that our proposed ranking-based recommendation framework achieves statistically significant improvement against both classical Collaborative Filtering/Latent Factor Models and state-of-the-art deep models in top-K recommendation.