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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 Graduate School of Economics.
  • Handle: RePEc:bge:wpaper:717
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    File URL: http://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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    Citations

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    Cited by:

    1. Larbi Alaoui & Fabrizio Germano, 2012. "Time scarcity and the market for news," Economics Working Papers 1348, Department of Economics and Business, Universitat Pompeu Fabra, revised Sep 2014.
    2. Peitz, Martin & Reisinger, Markus, 2014. "The Economics of Internet Media," Working Papers 14-23, University of Mannheim, Department of Economics.
    3. Fabrizio Germano & Francesco Sobbrio, 2016. "Opinion dynamics via search engines (and other algorithmic gatekeepers)," Economics Working Papers 1552, Department of Economics and Business, Universitat Pompeu Fabra, revised Mar 2018.
    4. Matthew Ellman & Tomás Rodríguez Barraquer, 2016. "Strategic grouping and search for quality journalism, online versus offline," Working Papers 16-21, NET Institute.
    5. Chen, Yongmin & Zhang, Tianle, 2016. "Intermediaries and Consumer Search," MPRA Paper 76051, University Library of Munich, Germany.
    6. Prüfer, Jens & Schottmuller, C., 2017. "Competing with Big Data," Discussion Paper 2017-006, Tilburg University, Tilburg Law and Economic Center.
    7. Hummel, Patrick, 2016. "Position auctions with dynamic resizing," International Journal of Industrial Organization, Elsevier, vol. 45(C), pages 38-46.

    More about this item

    Keywords

    search engine bias; internet economics; vertical integration; two-sided markets; antitrust;

    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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