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Market Dominance And Search Quality In The Search Engine Market

Author

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  • Ioannis Lianos
  • Evgenia Motchenkova

Abstract

We analyze a search engine market from a law and economics perspective and incorporate the choice of quality-improving innovations by a search engine platform in a two-sided model of Internet search engine. In the proposed framework, we first discuss the legal issues the search engine market raises for antitrust policy through analysis of several types of abusive behavior by the dominant platform. We also explore possible consequences of monopolization of the search engine market for advertisers and users in the form of excessive pricing and deterioration of the quality of the search results. Second, in the technical analysis part, we incorporate these considerations in a two-sided market model and analyze the rate of innovation, pricing, and quality choices by the dominant search engine. Our findings show that a dominant monopoly platform results in higher prices and underinvestment in quality-improving innovations by a search engine relative to the social optimum. More generally, we show that monopoly is sub-optimal in terms of harm to advertisers in the form of excessive prices, harm to users in the form of reduction in quality of search results, as well as harm to the society in the form of lower innovation rates in the industry.

Suggested Citation

  • Ioannis Lianos & Evgenia Motchenkova, 2013. "Market Dominance And Search Quality In The Search Engine Market," Journal of Competition Law and Economics, Oxford University Press, vol. 9(2), pages 419-455.
    • Handle: RePEc:oup:jcomle:v:9:y:2013:i:2:p:419-455.
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    File URL: http://hdl.handle.net/10.1093/joclec/nhs037
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    Citations

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    Cited by:

    1. Jens Prüfer & Christoph Schottmüller, 2021. "Competing with Big Data," Journal of Industrial Economics, Wiley Blackwell, vol. 69(4), pages 967-1008, December.
    2. Eric K. Clemons & Ravi V. Waran & Sebastian Hermes & Maximilian Schreieck & Helmut Krcmar, 2022. "Computing and Social Welfare," Electronic Markets, Springer;IIM University of St. Gallen, vol. 32(2), pages 417-436, June.
    3. Edward Iacobucci & Francesco Ducci, 2019. "The Google search case in Europe: tying and the single monopoly profit theorem in two-sided markets," European Journal of Law and Economics, Springer, vol. 47(1), pages 15-42, February.
    4. Marco Botta & Klaus Wiedemann, 2020. "To discriminate or not to discriminate? Personalised pricing in online markets as exploitative abuse of dominance," European Journal of Law and Economics, Springer, vol. 50(3), pages 381-404, December.
    5. Ji, Sung Wook & Choi, Young-jun & Ryu, Min Ho, 2016. "The economic effects of domestic search engines on the development of the online advertising market," Telecommunications Policy, Elsevier, vol. 40(10), pages 982-995.
    6. Budzinski, Oliver, 2016. "Aktuelle Herausforderungen der Wettbewerbspolitik durch Marktplätze im Internet," Ilmenau Economics Discussion Papers 103, Ilmenau University of Technology, Institute of Economics.

    More about this item

    JEL classification:

    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
    • L88 - Industrial Organization - - Industry Studies: Services - - - Government Policy

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