IDEAS home Printed from https://ideas.repec.org/p/aub/autbar/935.13.html
   My bibliography  Save this paper

In Google we trust?

Author

Listed:
  • Roberto Burguet
  • Ramon Caminal
  • Matthew Ellman

Abstract

In a micro-founded model, we derive novel incentives for a monopoly search engine to distort its organic and its sponsored results on searches for online content and offline products. Distorting organic results towards content publishers with less effective display advertising and/or distorting sponsored results towards higher margin merchants (by underweighting consumer relevance in search auctions) increase per capita revenues but lower participation. The interplay of these incentives determines search bias and welfare. We also characterize how the welfare consequences of integration into display advertising, as intermediary or publisher, depend on asymmetries, monopolization and targeting.

Suggested Citation

  • 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.
  • Handle: RePEc:aub:autbar:935.13
    as

    Download full text from publisher

    File URL: http://pareto.uab.es/wp/2013/93513.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Lizhen Xu & Jianqing Chen & Andrew Whinston, 2012. "Effects of the Presence of Organic Listing in Search Advertising," Information Systems Research, INFORMS, vol. 23(4), pages 1284-1302, December.
    2. Susan Athey & Glenn Ellison, 2011. "Position Auctions with Consumer Search," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 126(3), pages 1213-1270.
    3. Alexandre Cornière & Greg Taylor, 2014. "Integration and search engine bias," RAND Journal of Economics, RAND Corporation, vol. 45(3), pages 576-597, September.
    4. Benjamin Edelman & Michael Schwarz, 2010. "Optimal Auction Design and Equilibrium Selection in Sponsored Search Auctions," American Economic Review, American Economic Association, vol. 100(2), pages 597-602, May.
    5. Jay Pil Choi & Byung‐Cheol Kim, 2010. "Net neutrality and investment incentives," RAND Journal of Economics, RAND Corporation, vol. 41(3), pages 446-471, September.
    6. Cédric Argenton & Jens Prüfer, 2012. "Search Engine Competition With Network Externalities," Journal of Competition Law and Economics, Oxford University Press, vol. 8(1), pages 73-105.
    7. Attila Ambrus & Emilio Calvano & Markus Reisinger, 2016. "Either or Both Competition: A "Two-Sided" Theory of Advertising with Overlapping Viewerships," American Economic Journal: Microeconomics, American Economic Association, vol. 8(3), pages 189-222, August.
    8. De Liu & Jianqing Chen & Andrew B. Whinston, 2010. "Ex Ante Information and the Design of Keyword Auctions," Information Systems Research, INFORMS, vol. 21(1), pages 133-153, March.
    9. Alaoui, Larbi & Germano, Fabrizio, 2020. "Time scarcity and the market for news," Journal of Economic Behavior & Organization, Elsevier, vol. 174(C), pages 173-195.
    10. Tarantino, Emanuele, 2013. "A simple model of vertical search engines foreclosure," Telecommunications Policy, Elsevier, vol. 37(1), pages 1-12.
    11. Burguet, Roberto & Caminal, Ramon & Ellman, Matthew, 2015. "In Google we trust?," International Journal of Industrial Organization, Elsevier, vol. 39(C), pages 44-55.
    12. Benjamin Edelman & Michael Schwarz, 2010. "Optimal Auction Design and Equilibrium Selection in Sponsored Search Auctions," Harvard Business School Working Papers 10-054, Harvard Business School.
    13. Kfir Eliaz & Ran Spiegler, 2011. "A Simple Model of Search Engine Pricing," Economic Journal, Royal Economic Society, vol. 121(556), pages 329-339, November.
    14. 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.
    15. White, Alexander, 2013. "Search engines: Left side quality versus right side profits," International Journal of Industrial Organization, Elsevier, vol. 31(6), pages 690-701.
    16. 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, September.
    17. Susan Athey & Emilio Calvano & Joshua Gans, 2013. "The Impact of the Internet on Advertising Markets for News Media," NBER Working Papers 19419, National Bureau of Economic Research, Inc.
    18. Yongmin Chen & Chuan He, 2011. "Paid Placement: Advertising and Search on the Internet," Economic Journal, Royal Economic Society, vol. 121(556), pages 309-328, November.
    19. Matthew Ellman & Fabrizio Germano, 2009. "What do the Papers Sell? A Model of Advertising and Media Bias," Economic Journal, Royal Economic Society, vol. 119(537), pages 680-704, April.
    20. Lori Lorigo & Maya Haridasan & Hrönn Brynjarsdóttir & Ling Xia & Thorsten Joachims & Geri Gay & Laura Granka & Fabio Pellacini & Bing Pan, 2008. "Eye tracking and online search: Lessons learned and challenges ahead," Journal of the American Society for Information Science and Technology, Association for Information Science & Technology, vol. 59(7), pages 1041-1052, May.
    21. Bernard J. Jansen & Marc Resnick, 2006. "An examination of searcher's perceptions of nonsponsored and sponsored links during ecommerce Web searching," Journal of the American Society for Information Science and Technology, Association for Information Science & Technology, vol. 57(14), pages 1949-1961, December.
    22. Thomas Blake & Chris Nosko & Steven Tadelis, 2015. "Consumer Heterogeneity and Paid Search Effectiveness: A Large‐Scale Field Experiment," Econometrica, Econometric Society, vol. 83, pages 155-174, January.
    23. Kenneth C. Wilbur, 2008. "A Two-Sided, Empirical Model of Television Advertising and Viewing Markets," Marketing Science, INFORMS, vol. 27(3), pages 356-378, 05-06.
    24. Mark Armstrong & Jidong Zhou, 2011. "Paying for Prominence," Economic Journal, Royal Economic Society, vol. 121(556), pages 368-395, November.
    25. Matthew Ellman & Fabrizio Germano, "undated". "What Do the Papers Sell?," Working Papers 149, Barcelona School of Economics.
    26. Varian, Hal R., 2007. "Position auctions," International Journal of Industrial Organization, Elsevier, vol. 25(6), pages 1163-1178, December.
    27. Michael R. Baye & John Morgan, 2001. "Information Gatekeepers on the Internet and the Competitiveness of Homogeneous Product Markets," American Economic Review, American Economic Association, vol. 91(3), pages 454-474, June.
    28. 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.
    29. Andrei Hagiu & Bruno Jullien, 2011. "Why do intermediaries divert search?," RAND Journal of Economics, RAND Corporation, vol. 42(2), pages 337-362, June.
    30. James D. Ratliff & Daniel L. Rubinfeld, 2010. "Online Advertising: Defining Relevant Markets," Journal of Competition Law and Economics, Oxford University Press, vol. 6(3), pages 653-686.
    31. Etro, Federico, 2013. "Advertising and search engines. A model of leadership in search advertising," Research in Economics, Elsevier, vol. 67(1), pages 25-38.
    32. Sha Yang & Anindya Ghose, 2010. "Analyzing the Relationship Between Organic and Sponsored Search Advertising: Positive, Negative, or Zero Interdependence?," Marketing Science, INFORMS, vol. 29(4), pages 602-623, 07-08.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    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. Chen, Yongmin & Zhang, Tianle, 2018. "Intermediaries and consumer search," International Journal of Industrial Organization, Elsevier, vol. 57(C), pages 255-277.
    3. Alaoui, Larbi & Germano, Fabrizio, 2020. "Time scarcity and the market for news," Journal of Economic Behavior & Organization, Elsevier, vol. 174(C), pages 173-195.
    4. Burguet, Roberto & Caminal, Ramon & Ellman, Matthew, 2015. "In Google we trust?," International Journal of Industrial Organization, Elsevier, vol. 39(C), pages 44-55.
    5. Germano, Fabrizio & Sobbrio, Francesco, 2020. "Opinion dynamics via search engines (and other algorithmic gatekeepers)," Journal of Public Economics, Elsevier, vol. 187(C).
    6. Peitz, Martin & Reisinger, Markus, 2014. "The Economics of Internet Media," Working Papers 14-23, University of Mannheim, Department of Economics.
    7. Chen, Yongmin, 2020. "Improving market performance in the digital economy," China Economic Review, Elsevier, vol. 62(C).
    8. Jens Prüfer & Christoph Schottmüller, 2021. "Competing with Big Data," Journal of Industrial Economics, Wiley Blackwell, vol. 69(4), pages 967-1008, December.
    9. 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).
    10. Matthew Ellman & Tomás Rodríguez Barraquer, 2016. "Strategic grouping and search for quality journalism, online versus offline," Working Papers 16-21, NET Institute.
    11. Paul Belleflamme & Martin Peitz, 2018. "Inside the Engine Room of Digital Platforms: Reviews, Ratings, and Recommendations," Working Papers halshs-01714549, HAL.
    12. 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.
    13. Matthew Mitchell, 2018. "Free (Ad)vice," 2018 Meeting Papers 1194, Society for Economic Dynamics.
    14. 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).
    15. Bisceglia, Michele, 2023. "The unbundling of journalism," European Economic Review, Elsevier, vol. 158(C).
    16. 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.
    17. Carlo Reggiani & Alejandro Saporiti & Lois Simanjuntak, 2018. "Social Information and Consumer Heterogeneity," Economics Discussion Paper Series 1813, Economics, The University of Manchester.
    18. Hummel, Patrick, 2016. "Position auctions with dynamic resizing," International Journal of Industrial Organization, Elsevier, vol. 45(C), pages 38-46.
    19. Chen, Yongmin, 2023. "Search and Competition Under Product Quality Uncertainty," MPRA Paper 116609, University Library of Munich, Germany.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Alexandre Cornière & Greg Taylor, 2014. "Integration and search engine bias," RAND Journal of Economics, RAND Corporation, vol. 45(3), pages 576-597, September.
    2. Peitz, Martin & Reisinger, Markus, 2014. "The Economics of Internet Media," Working Papers 14-23, University of Mannheim, Department of Economics.
    3. Avi Goldfarb, 2014. "What is Different About Online Advertising?," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 44(2), pages 115-129, March.
    4. Chen, Yongmin & Zhang, Tianle, 2018. "Intermediaries and consumer search," International Journal of Industrial Organization, Elsevier, vol. 57(C), pages 255-277.
    5. Alaoui, Larbi & Germano, Fabrizio, 2020. "Time scarcity and the market for news," Journal of Economic Behavior & Organization, Elsevier, vol. 174(C), pages 173-195.
    6. 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.
    7. Emanuele Tarantino, 2012. "A Note on Vertical Search Engines’ Foreclosure," Chapters, in: Joseph E. Harrington Jr & Yannis Katsoulacos (ed.), Recent Advances in the Analysis of Competition Policy and Regulation, chapter 8, Edward Elgar Publishing.
    8. White, Alexander, 2013. "Search engines: Left side quality versus right side profits," International Journal of Industrial Organization, Elsevier, vol. 31(6), pages 690-701.
    9. Fei Long & Kinshuk Jerath & Miklos Sarvary, 2022. "Designing an Online Retail Marketplace: Leveraging Information from Sponsored Advertising," Marketing Science, INFORMS, vol. 41(1), pages 115-138, January.
    10. Alexandre de Cornière, 2016. "Search Advertising," American Economic Journal: Microeconomics, American Economic Association, vol. 8(3), pages 156-188, August.
    11. Paul Belleflamme & Martin Peitz, 2018. "Inside the Engine Room of Digital Platforms: Reviews, Ratings, and Recommendations," Working Papers halshs-01714549, HAL.
    12. Hummel, Patrick, 2016. "Position auctions with dynamic resizing," International Journal of Industrial Organization, Elsevier, vol. 45(C), pages 38-46.
    13. Renato Gomes, 2014. "Optimal auction design in two-sided markets," RAND Journal of Economics, RAND Corporation, vol. 45(2), pages 248-272, June.
    14. Wei Zhou & Zidong Wang, 2020. "Competing for Search Traffic in Query Markets: Entry Strategy, Platform Design, and Entrepreneurship," Working Papers 20-12, NET Institute.
    15. Hagiu, Andrei & Jullien, Bruno, 2014. "Search diversion and platform competition," International Journal of Industrial Organization, Elsevier, vol. 33(C), pages 48-60.
    16. Mark Armstrong & Jidong Zhou, 2011. "Paying for Prominence," Economic Journal, Royal Economic Society, vol. 121(556), pages 368-395, November.
    17. Jens Prüfer & Christoph Schottmüller, 2021. "Competing with Big Data," Journal of Industrial Economics, Wiley Blackwell, vol. 69(4), pages 967-1008, December.
    18. Chen, Yongmin, 2023. "Search and Competition Under Product Quality Uncertainty," MPRA Paper 116609, University Library of Munich, Germany.
    19. Huang, Yangguang & Xie, Yu, 2023. "Search algorithm, repetitive information, and sales on online platforms," International Journal of Industrial Organization, Elsevier, vol. 88(C).
    20. 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, September.

    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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aub:autbar:935.13. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Xavier Vila (email available below). General contact details of provider: https://edirc.repec.org/data/ufuabes.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.