Paid Placement: Advertising and Search on the Internet
AbstractPaid placement, where advertisers bid payments to a search engine to have their products appear next to keyword search results, has emerged as a predominant form of advertising on the Internet. This paper studies a product-diÂ¤erentiation model where consumers are initially uncertain about the desirability of and valuation for diÂ¤erent sellers? products, and can learn about a seller?s product through a costly search. In equilibrium, a seller bids more for placement when his product is more relevant for a given keyword, and the paid placement of sellers by the search engine reveals information about the relevance of their products. This results in eÂ¢ cient (sequential) search by consumers and increases total output.
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Bibliographic InfoArticle provided by Royal Economic Society in its journal The Economic Journal.
Volume (Year): 121 (2011)
Issue (Month): 556 (November)
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Other versions of this item:
- Yongmin Chen & Chuan He, 2006. "Paid Placement: Advertising and Search on the Internet," Working Papers 06-02, NET Institute, revised Sep 2006.
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