American Economic Journal:
Microeconomics
ISSN 1945-7669 (Print) | ISSN 1945-7685 (Online)
Search Advertising
American Economic Journal: Microeconomics
vol. 8,
no. 3, August 2016
(pp. 156–88)
Abstract
Search engines enable advertisers to target consumers based on the query they have entered. In a framework in which consumers search sequentially after having entered a query, I show that such targeting reduces search costs, improves matches and intensifies price competition. However, a profit-maximizing monopolistic search engine imposes a distortion by charging too high an advertising fee, which may negate the benefits of targeting. The search engine also has incentives to provide a suboptimal quality of sponsored links. Competition among search engines can increase or decrease welfare, depending on the extent of multi-homing by advertisers.Citation
de Cornière, Alexandre. 2016. "Search Advertising." American Economic Journal: Microeconomics, 8 (3): 156–88. DOI: 10.1257/mic.20130138Additional Materials
JEL Classification
- D43 Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection
- D83 Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
- L13 Oligopoly and Other Imperfect Markets
- L86 Information and Internet Services; Computer Software
- M37 Advertising
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