A Simple Model of Search Engine Pricing

Kfir Eliaz and Ran Spiegler ()

No 275752, Foerder Institute for Economic Research Working Papers from Tel-Aviv University > Foerder Institute for Economic Research

Abstract: We present a simple model of how a monopolistic search engine optimally determines the average relevance of firms in its search pool. In our model, there is a continuum of consumers, who use the search engine’s pool, and there is a continuum of firms, whose entry to the pool is restricted by a price-per-click set by the search engine. We show that a monopolistic search engine may have an incentive to set a relatively low price-per-click that encouarges low-relevance advertisers to enter the search pool. In general, the ratio between the marginal and average relevance in the search pool induced by the search engine’s policy is equal to the ratio between the search engine’s profit per consumer and the equilibrium product price. These conclusions do not change if the search engine charges fixed access fee rather than a price-per-click.

Keywords: Financial Economics; Research Methods/Statistical Methods (search for similar items in EconPapers)
Pages: 14
Date: 2010-09
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://ageconsearch.umn.edu/record/275752/files/14-2011.pdf (application/pdf)

Related works:
Journal Article: A Simple Model of Search Engine Pricing (2011)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ags:isfiwp:275752

DOI: 10.22004/ag.econ.275752

Access Statistics for this paper

More papers in Foerder Institute for Economic Research Working Papers from Tel-Aviv University > Foerder Institute for Economic Research Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().