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In Google We Trust?

  • Roberto Burguet
  • Ramon Caminal
  • Matthew Ellman

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.

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File URL: http://research.barcelonagse.eu/tmp/working_papers/717.pdf
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Paper provided by Barcelona Graduate School of Economics in its series Working Papers with number 717.

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Date of creation: Feb 2014
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Handle: RePEc:bge:wpaper:717
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  1. Etro, Federico, 2013. "Advertising and search engines. A model of leadership in search advertising," Research in Economics, Elsevier, vol. 67(1), pages 25-38.
  2. Argenton, C. & Prüfer, J., 2012. "Search engine competition with network externalities," Other publications TiSEM c76d07b9-7d86-42c4-9b47-c, Tilburg University, School of Economics and Management.
  3. 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, 04.
  4. Tom Blake & Chris Nosko & Steven Tadelis, 2014. "Consumer Heterogeneity and Paid Search Effectiveness: A Large Scale Field Experiment," NBER Working Papers 20171, National Bureau of Economic Research, Inc.
  5. 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.
  6. Susan Athey & Glenn Ellison, 2011. "Position Auctions with Consumer Search," The Quarterly Journal of Economics, Oxford University Press, vol. 126(3), pages 1213-1270.
  7. Yongmin Chen & Chuan He, 2006. "Paid Placement: Advertising and Search on the Internet," Working Papers 06-02, NET Institute, revised Sep 2006.
  8. 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.
  9. White, Alexander, 2013. "Search engines: Left side quality versus right side profits," International Journal of Industrial Organization, Elsevier, vol. 31(6), pages 690-701.
  10. Larbi Alaoui & Fabrizio Germano, 2014. "Time Scarcity and the Market for News," Working Papers 675, Barcelona Graduate School of Economics.
  11. repec:ner:tilbur:urn:nbn:nl:ui:12-5117898 is not listed on IDEAS
  12. repec:dgr:kubtil:2011024 is not listed on IDEAS
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