Paid Placement: Advertising and Search on the Internet

Yongmin Chen and Chuan He

No 06-02, Working Papers from NET Institute

Abstract: Paid placement, where advertisers bid payments to a search engine to have their products appear next to keyword search results, has emerged as a predominant form of advertising on the Internet. This paper studies a product-di¤erentiation model where consumers are initially uncertain about the desirability of and valuation for di¤erent sellers? products, and can learn about a seller?s product through a costly search. In equilibrium, a seller bids more for placement when his product is more relevant for a given keyword, and the paid placement of sellers by the search engine reveals information about the relevance of their products. This results in e¢ cient (sequential) search by consumers and increases total output.

Keywords: Paid placement; Advertising; Auction; E-commerce; Search (search for similar items in EconPapers)
Pages: 30 pages
Date: 2006-09, Revised 2006-09
New Economics Papers: this item is included in nep-ict, nep-ipr, nep-pr~ and nep-mkt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (35)

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Related works:
Journal Article: Paid Placement: Advertising and Search on the Internet (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:net:wpaper:0602

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