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Can the values in User-Item matrix be binary values like 0 and 1 which indicate “didn’t buy”-vs-“bought”?
And if apply latent factor model on the matrix, can the predicted value (for example 0.8) stand for the probability of user’s behavior(i.e. didn’t buy or bought)?
Yes, it is quite common to have implicit feedback to represent ratings. One slight pitfall with the suggestion you made would be if 0 means the user saw the item but chose not to buy it, or the user never even saw the item (i.e gave no feedback.)
Typically the value output from your recommendation algorithm isn’t a probability of a purchase, but rather a numerical score used to rank that item versus all other potential items. This way you can identify the top X items to recommend to a user.
You can use standard collaborative filtering on the type of data you discussed, and also using factorisation techniques.