A Simple Model of Search Engine Pricing

Bibliographic Data

ID9708027
AuthorsKfir Eliaz (0000-0001-8988-0726, Brown University), Ran Spiegler (0000-0001-9662-0236, Tel Aviv University and University College London)
Year2011
Volume121
Issue556
PagesF329-F339
Publication date2011-11-01
Peer ReviewedYes
Open AccessYes
TypeARTICLE
VenueThe Economic Journal (JOURNAL)
Journal identifiersISSN: 0013-0133 • E-ISSN: 1468-0297
PublisherOxford University Press (OUP) (PUBLISHER)
DOI10.1111/j.1468-0297.2011.02467.x
OpenAlexW2129489707
LanguageEN
Citations received8
References cited5

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 encourages 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 a fixed access fee rather than a price‐per‐click

Economics · Information retrieval · Mathematical economics · Metasearch engine · Microeconomics · Monopolistic competition · Monopoly · Relevance (law · Search analytics · Search cost · Search engine · Set (abstract data type · Web search query · Computer Science · Consumer Market Behavior and Pricing · Digital Platforms and Economics · Game Theory and Applications

Tools

Open DOISci-Hub