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Advertising and search engines. A model of leadership in search advertising

  • Etro, Federico

We analyze the role of leadership in a multi-sided market as search advertising, assuming quantity competition and different entry conditions (with barriers to entry or endogenous entry). The model can be microfounded taking into account network effects, multi-homing on the advertising side and scale in search. If there are barriers to entry and the network effects are strong, there is an incentive for the leader to exploit them and attract more consumers to monopolize advertising. Under barriers to entry, the leading platform has also a strategic incentive to exploit scale in search, to manipulate search results to divert search traffic from other platforms, and to introduce limits to multi-homing, with the aim of expanding its market share and deny scale to competitors.

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Article provided by Elsevier in its journal Research in Economics.

Volume (Year): 67 (2013)
Issue (Month): 1 ()
Pages: 25-38

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Handle: RePEc:eee:reecon:v:67:y:2013:i:1:p:25-38
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  1. Paul Milgrom & Robert J. Weber, 1981. "A Theory of Auctions and Competitive Bidding," Discussion Papers 447R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  2. Etro, Federico, 2011. "Endogenous market structures and contract theory: Delegation, principal-agent contracts, screening, franchising and tying," European Economic Review, Elsevier, vol. 55(4), pages 463-479, May.
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  5. Federico Etro, 2010. "Endogenous Market Structures and Contract Theory," Working Papers 181, University of Milano-Bicocca, Department of Economics, revised Mar 2010.
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  10. Affeldt, P. & Filistrucchi, L. & Klein, T.J., 2012. "Upward Pricing Pressure in Two-Sided Markets," Discussion Paper 2012-029, Tilburg University, Tilburg Law and Economic Center.
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