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Search Advertising

Alexandre de Cornière ()

No 649, Economics Series Working Papers from University of Oxford, Department of Economics

Abstract: 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.

Keywords: Search engine; targeted advertising; consumer search (search for similar items in EconPapers)
JEL-codes: D43 D83 L13 M37 (search for similar items in EconPapers)
Date: 2013-03-20
New Economics Papers: this item is included in nep-com, nep-cwa, nep-ind, nep-mic and nep-mkt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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