Search Advertising

Alexandre de Cornière

American Economic Journal: Microeconomics, 2016, vol. 8, issue 3, 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.

JEL-codes: D43 D83 L13 L86 M37 (search for similar items in EconPapers)
Date: 2016
Note: DOI: 10.1257/mic.20130138
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Citations: View citations in EconPapers (8)

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