Complements and substitutes in product recommendations: The differential effects on consumers' willingness-to-pay

Product recommendations have been shown to influence consumers' preferences and purchasing behavior. However, empirical evidence has yet to be found illustrating whether and how the recommendations of other products affect a consumers' economic behavior for the focal product. In many e-commerce websites, a product is presented with co-purchase and co-view recommendations which potentially contain complement and substitute products, respectively. Very little research has explored the differential effects of complementary and substitutable recommendations. In this study, we are interested in how the type of recommendations of other products impact the consumers' willingness-to-pay for the focal product, and additionally how the recommendations' price and the consumers' decision stage moderate this effect. We conducted a 2x2x2 randomized experiment to examine how the consumers' willingness-to-pay is affected by these factors. Experimental results provide evidence that there is no significant main effect difference between complementary and substitutable recommendations. But we observed a significant interaction effect between recommendation type and decision stage, which highlights the importance of timing in recommender systems. Other findings include that consumers are willing to pay more for a specific product when the price of a recommended product is high, as well as when they are in later decision stages. These findings have significant implications for the design and applications of recommender systems.