In Google We Trust?
AbstractWe develop a model of the interacting markets for online content and offline products. We portray content providers and the search engine as competing platforms that intermediate in the product market (a horizontal relation), while also vertically related in the content market. Explicitly modeling both markets allows us to characterize the substitutability (and manipulability) of search and display advertising, and its effect on the incentives to distort organic search results as well as spillovers on the reliability of sponsored search results. Specifically, improvements in the technology for targeting display ads increases this substitutability and the threat of organic search distortions. Integration of the search engine that results in full monopolization of the display ad market improves search reliability and raises consumer and total welfare, if content providers are similar. However, partial integration, or full integration when content providers differ in their ad effectiveness, introduce additional incentives for distortion and may reduce consumer and total welfare.
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Bibliographic InfoPaper provided by Barcelona Graduate School of Economics in its series Working Papers with number 717.
Date of creation: Feb 2014
Date of revision:
search engine bias; internet economics; vertical integration; two-sided markets; antitrust;
Other versions of this item:
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
- L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media
- L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-10-11 (All new papers)
- NEP-COM-2013-10-11 (Industrial Competition)
- NEP-ICT-2013-10-11 (Information & Communication Technologies)
- NEP-MIC-2013-10-11 (Microeconomics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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The Quarterly Journal of Economics,
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Economics Working Papers
1348, Department of Economics and Business, Universitat Pompeu Fabra, revised Dec 2013.
- Argenton, C. & Prüfer, J., 2012.
"Search engine competition with network externalities,"
Open Access publications from Tilburg University
urn:nbn:nl:ui:12-5117898, Tilburg University.
- Argenton, C. & Prüfer, J., 2011. "Search Engine Competition with Network Externalities," Discussion Paper 2011-024, Tilburg University, Tilburg Law and Economic Center.
- Etro, Federico, 2013. "Advertising and search engines. A model of leadership in search advertising," Research in Economics, Elsevier, vol. 67(1), pages 25-38.
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- 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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