AbstractSearch engines enable advertisers to target consumers based on the query they have entered.� In a framework with horizontal product differentiation, imperfect product information and in which consumers incur search costs, I study a game in which advertisers have to choose a price and a set of relevant keywords.� The targeting mechanism brings about three kinds of efficiency gains, namely lower search costs, better matching, and more intense product market price-competition.� A monopolistic search engine charges advertisers too high a price, and has incentives to provide a suboptimal matching quality.� Competition among search engines eliminates the latter distortion, but exacerbates the former.
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Bibliographic InfoPaper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 649.
Date of creation: 20 Mar 2013
Date of revision:
Search engine; targeted advertising; consumer search;
Find related papers by JEL classification:
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- M37 - Business Administration and Business Economics; Marketing; Accounting - - Marketing and Advertising - - - Advertising
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-04-20 (All new papers)
- NEP-COM-2013-04-20 (Industrial Competition)
- NEP-CWA-2013-04-20 (Central & Western Asia)
- NEP-IND-2013-04-20 (Industrial Organization)
- NEP-MIC-2013-04-20 (Microeconomics)
- NEP-MKT-2013-04-20 (Marketing)
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