Search Engine Competition with Network Externalities
AbstractThe market for Internet search is not only economically and socially important, it is also highly concentrated. Is this a problem? We study the question whether "competition is only a free click away". We argue that the market for Internet search is characterized by indirect network externalities and construct a simple model of search engine competition, which produces a market share development that fits the empirically observed development since 2003 well. We find that there is a strong tendency towards market tipping and, subsequently, monopolization, with negative consequences on economic welfare. Therefore, we propose to require search engines to share their data on previous searches. We compare the resulting "competitive oligopoly" market structure with the less competitive current situation and show that our proposal would spur innovation, search quality, consumer surplus, and total welfare. We also discuss the practical feasibility of our policy proposal and sketch the legal issues involved.
Download InfoTo our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
Bibliographic InfoPaper provided by Tilburg University, Tilburg Law and Economic Center in its series Discussion Paper with number 2011-024.
Date of creation: 2011
Date of revision:
Contact details of provider:
Web page: https://www.tilburguniversity.edu/research/institutes-and-research-groups/center-ar/
Search engines; network externalities; query logs; antitrust; regulation;
Other versions of this item:
- 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.
- L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
- K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law
- L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
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.:
- Gandal, Neil, 2001.
"The Dynamics of Competition in the Internet Search Engine Market,"
Department of Economics, Working Paper Series
qt0h17g08v, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Gandal, Neil, 2001. "The dynamics of competition in the internet search engine market," International Journal of Industrial Organization, Elsevier, vol. 19(7), pages 1103-1117, July.
- Gandal, Neil, 2000. "The Dynamics of Competition in the Internet Search Engine Market," Competition Policy Center, Working Paper Series qt8jk0904s, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
- Gandal, N., 2000. "The Dynamics of Competition in the Internet Search Engine Market," Papers 1-2000, Tel Aviv.
- Neil Gandal, 2001. "The Dynamics of Competition in the Internet Search Engine Market," Microeconomics 0012003, EconWPA.
- Avi Goldfarb & Catherine Tucker, 2011. "Search Engine Advertising: Channel Substitution When Pricing Ads to Context," Management Science, INFORMS, vol. 57(3), pages 458-470, March.
- Eric T. G. Wang & Abraham Seidmann, 1995. "Electronic Data Interchange: Competitive Externalities and Strategic Implementation Policies," Management Science, INFORMS, vol. 41(3), pages 401-418, March.
- Frederick J. Riggins & Charles H. Kriebel & Tridas Mukhopadhyay, 1994. "The Growth of Interorganizational Systems in the Presence of Network Externalities," Management Science, INFORMS, vol. 40(8), pages 984-998, August.
- C. Lanier Benkard, 2000. "Learning and Forgetting: The Dynamics of Aircraft Production," American Economic Review, American Economic Association, vol. 90(4), pages 1034-1054, September.
- Ingo Vogelsang, 2003. "Price Regulation of Access to Telecommunications Networks," Journal of Economic Literature, American Economic Association, vol. 41(3), pages 830-862, September.
- Yongmin Chen & Chuan He, 2006.
"Paid Placement: Advertising and Search on the Internet,"
06-02, NET Institute, revised Sep 2006.
- Yongmin Chen & Chuan He, 2011. "Paid Placement: Advertising and Search on the Internet," Economic Journal, Royal Economic Society, vol. 121(556), pages F309-F328, November.
- repec:rje:randje:v:37:y:2006:3:p:645-667 is not listed on IDEAS
- Jinhong Xie & Marvin Sirbu, 1995. "Price Competition and Compatibility in the Presence of Positive Demand Externalities," Management Science, INFORMS, vol. 41(5), pages 909-926, May.
- Pollock Rufus, 2010. "Is Google the Next Microsoft: Competition, Welfare and Regulation in Online Search," Review of Network Economics, De Gruyter, vol. 9(4), pages 1-31, December.
- Evans David S., 2008. "The Economics of the Online Advertising Industry," Review of Network Economics, De Gruyter, vol. 7(3), pages 1-33, September.
- Benjamin Edelman & Michael Ostrovsky & Michael Schwarz, 2005.
"Internet Advertising and the Generalized Second Price Auction: Selling Billions of Dollars Worth of Keywords,"
NBER Working Papers
11765, National Bureau of Economic Research, Inc.
- Benjamin Edelman & Michael Ostrovsky & Michael Schwarz, 2007. "Internet Advertising and the Generalized Second-Price Auction: Selling Billions of Dollars Worth of Keywords," American Economic Review, American Economic Association, vol. 97(1), pages 242-259, March.
- Song Yao & Carl F. Mela, 2008. "A Dynamic Model of Sponsored Search Advertising," Working Papers 08-16, NET Institute, revised Sep 2008.
- Avi Goldfarb & Catherine Tucker, 2011. "Online Display Advertising: Targeting and Obtrusiveness," Marketing Science, INFORMS, vol. 30(3), pages 389-404, 05-06.
- Greg Taylor, 2013. "Search Quality and Revenue Cannibalization by Competing Search Engines," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 22(3), pages 445-467, 09.
- Song Yao & Carl F. Mela, 2011. "A Dynamic Model of Sponsored Search Advertising," Marketing Science, INFORMS, vol. 30(3), pages 447-468, 05-06.
- Stanley M. Besen & Joseph Farrell, 1994. "Choosing How to Compete: Strategies and Tactics in Standardization," Journal of Economic Perspectives, American Economic Association, vol. 8(2), pages 117-131, Spring.
- Roberto Burguet & Ramon Caminal & Matthew Ellman, 2014.
"In Google We Trust?,"
717, Barcelona Graduate School of Economics.
- Etro, Federico, 2013. "Advertising and search engines. A model of leadership in search advertising," Research in Economics, Elsevier, vol. 67(1), pages 25-38.
- Haucap, Justus & Heimeshoff, Ulrich, 2013.
"Google, Facebook, Amazon, eBay: Is the internet driving competition or market monopolization?,"
DICE Discussion Papers
83, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
- Justus Haucap & Ulrich Heimeshoff, 2014. "Google, Facebook, Amazon, eBay: Is the Internet driving competition or market monopolization?," International Economics and Economic Policy, Springer, vol. 11(1), pages 49-61, February.
- Lianos, I. & Motchenkova, E., 2012. "Market dominance and quality of search results in the search engine market," Discussion Paper 2012-036, Tilburg University, Tilburg Law and Economic Center.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Richard Broekman) The email address of this maintainer does not seem to be valid anymore. Please ask Richard Broekman to update the entry or send us the correct address.
If references are entirely missing, you can add them using this form.