AI and personalization

This chapter reviews the recent developments at the intersection of personalization and AI in marketing and related fields. We provide a formal definition of personalized policy and review the methodological approaches available for personalization. We discuss scalability, generalizability, and counterfactual validity issues and briefly touch upon advanced methods for online/interactive/dynamic settings. We then summarize the three evaluation approaches for static policies – the Direct method, the Inverse Propensity Score (IPS) estimator, and the Doubly Robust (DR) method. Next, we present a summary of the evaluation approaches for special cases such as continuous actions and dynamic settings. We then summarize the findings on the returns to personalization across various domains, including content recommendation, advertising, and promotions. Next, we discuss the work on the intersection between personalization and welfare. We focus on four of these welfare notions that have been studied in the literature: (1) search costs, (2) privacy, (3) fairness, and (4) polarization. We conclude with a discussion of the remaining challenges and some directions for future research.