Recommendation Systems for Markets with Two Sided Preferences

In recent times we have witnessed the emergence of large online markets with two-sided preferences that are responsible for businesses worth billions of dollars. Recommendation systems are critical components of such markets. It is to be noted that the matching in such a market depends on the preferences of both sides, consequently, the construction of a recommendation system for such a market calls for consideration of preferences of both sides. The online dating market, and the online freelancer market are examples of markets with two-sided preferences. Recommendation systems for such markets are fundamentally different from typical rating based product recommendations. We pose this problem as a bipartite ranking problem. There has been extensive research on bipartite ranking algorithms. Typically, generalized linear regression models are popular methods of constructing such ranking on account of their ability to be learned easily from big data, and their computational simplicity on engineering platforms. However, we show that for markets with two sided preferences, one can improve the AUC (Area Under the receiver operator Curve) score by considering separate models for preferences of both the sides and constructing a two layer architecture for ranking. We call this a two-level model algorithm. For both synthetic and real data we show that the two-level model algorithm has a better AUC performance than the direct application of a generalized linear model such as L₁ logistic regression or an ensemble method such as random forest algorithm. We provide a theoretical justification of AUC optimality of two-level model and pose a theoretical problem for a more general result.