Diversity of preferences can increase collective welfare in sequential exploration problems
This addresses the challenge of balancing exploration and imitation in human-computer interfaces to enhance group outcomes, offering a novel insight into how diversity can mitigate inefficiencies in collective decision-making.
The paper tackles the problem of collective welfare in sequential exploration systems like search engines and marketplaces, where individual imitation reduces group information gain. It shows that preference diversity increases the quality of consumed alternatives more than it raises search costs, leading to improved collective welfare.
In search engines, online marketplaces and other human-computer interfaces large collectives of individuals sequentially interact with numerous alternatives of varying quality. In these contexts, trial and error (exploration) is crucial for uncovering novel high-quality items or solutions, but entails a high cost for individual users. Self-interested decision makers, are often better off imitating the choices of individuals who have already incurred the costs of exploration. Although imitation makes sense at the individual level, it deprives the group of additional information that could have been gleaned by individual explorers. In this paper we show that in such problems, preference diversity can function as a welfare enhancing mechanism. It leads to a consistent increase in the quality of the consumed alternatives that outweighs the increased cost of search for the users.