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In Google We Trust?

Author

Listed:
  • Roberto Burguet
  • Ramon Caminal
  • Matthew Ellman

Abstract

We 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.

Suggested Citation

  • Roberto Burguet & Ramon Caminal & Matthew Ellman, 2014. "In Google We Trust?," Working Papers 717, Barcelona School of Economics.
    • Handle: RePEc:bge:wpaper:717
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    File URL: https://www.barcelonagse.eu/sites/default/files/working_paper_pdfs/717.pdf
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    Other versions of this item:

    • Roberto Burguet & Ramon Caminal & Matthew Ellman, 2013. "In Google we trust?," UFAE and IAE Working Papers 935.13, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC), revised 12 Feb 2014.

    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Matthew Mitchell, 2021. "Free ad(vice): internet influencers and disclosure regulation," RAND Journal of Economics, RAND Corporation, vol. 52(1), pages 3-21, March.
    2. Alaoui, Larbi & Germano, Fabrizio, 2020. "Time scarcity and the market for news," Journal of Economic Behavior & Organization, Elsevier, vol. 174(C), pages 173-195.
    3. Burguet, Roberto & Caminal, Ramon & Ellman, Matthew, 2015. "In Google we trust?," International Journal of Industrial Organization, Elsevier, vol. 39(C), pages 44-55.
    4. Peitz, Martin & Reisinger, Markus, 2014. "The Economics of Internet Media," Working Papers 14-23, University of Mannheim, Department of Economics.
    5. Chen, Yongmin, 2020. "Improving market performance in the digital economy," China Economic Review, Elsevier, vol. 62(C).
    6. de Cornière, Alexandre & Sarvary, Miklos, 2020. "Social Media and News: Content Bundling and news Quality," TSE Working Papers 20-1152, Toulouse School of Economics (TSE).
    7. Germano, Fabrizio & Sobbrio, Francesco, 2020. "Opinion dynamics via search engines (and other algorithmic gatekeepers)," Journal of Public Economics, Elsevier, vol. 187(C).
    8. Paul Belleflamme & Martin Peitz, 2018. "Inside the Engine Room of Digital Platforms: Reviews, Ratings, and Recommendations," Working Papers halshs-01714549, HAL.
    9. Marc Bourreau & Germain Gaudin, 2022. "Streaming platform and strategic recommendation bias," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 31(1), pages 25-47, February.
    10. Matthew Mitchell, 2018. "Free (Ad)vice," 2018 Meeting Papers 1194, Society for Economic Dynamics.
    11. Jan Krämer, & Daniel Schnurr,, 2018. "Is there a need for platform neutrality regulation in the EU?," Telecommunications Policy, Elsevier, vol. 42(7), pages 514-529.
    12. Carlo Reggiani & Alejandro Saporiti & Lois Simanjuntak, 2018. "Social Information and Consumer Heterogeneity," Economics Discussion Paper Series 1813, Economics, The University of Manchester.
    13. Jens Prüfer & Christoph Schottmüller, 2021. "Competing with Big Data," Journal of Industrial Economics, Wiley Blackwell, vol. 69(4), pages 967-1008, December.
    14. Chen, Yongmin, 2023. "Search and Competition Under Product Quality Uncertainty," MPRA Paper 116609, University Library of Munich, Germany.
    15. Chen, Yongmin & Zhang, Tianle, 2018. "Intermediaries and consumer search," International Journal of Industrial Organization, Elsevier, vol. 57(C), pages 255-277.
    16. Matthew Ellman & Tomás Rodríguez Barraquer, 2016. "Strategic grouping and search for quality journalism, online versus offline," Working Papers 16-21, NET Institute.
    17. Aridor, Guy & Gonçalves, Duarte, 2022. "Recommenders’ originals: The welfare effects of the dual role of platforms as producers and recommender systems," International Journal of Industrial Organization, Elsevier, vol. 83(C).
    18. Bisceglia, Michele, 2023. "The unbundling of journalism," European Economic Review, Elsevier, vol. 158(C).
    19. Hummel, Patrick, 2016. "Position auctions with dynamic resizing," International Journal of Industrial Organization, Elsevier, vol. 45(C), pages 38-46.

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    More about this item

    Keywords

    search engine bias; internet economics; vertical integration; two-sided markets; antitrust;
    All these keywords.

    JEL classification:

    • 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

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