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Search Advertising

  • Alexandre de Cornière

Search 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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Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 649.

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Date of creation: 20 Mar 2013
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Handle: RePEc:oxf:wpaper:649
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