Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

A Member of the Law Professor Blogs Network

Thursday, May 17, 2012

Search Engine Competition with Network Externalities

Posted by D. Daniel Sokol

Cedric Argenton (Tilburg) and Jens Prufer (Tilburg) analyze Search Engine Competition with Network Externalities.

ABSTRACT: The market for Internet search is not only economically and socially important, it is also highly concentrated. Is this a problem? We study the question of whether “competition is only a free click away.” We argue that the market for Internet search is characterized by indirect network externalities and construct a simple model of search engine competition, which produces a market share development that fits well the empirically observed developments since 2003. We find that there is a strong tendency toward market tipping and, subsequently, monopolization, with negative consequences on economic welfare. Therefore, we propose to require search engines to share their data on previous searches. We compare the resulting “competitive oligopoly” market structure with the less-competitive current situation and show that our proposal would spur innovation, search quality, consumer surplus, and total welfare. We also discuss the practical feasibility of our policy proposal and sketch the legal issues involved.

http://lawprofessors.typepad.com/antitrustprof_blog/2012/05/search-engine-competition-with-network-externalities.html

| Permalink

TrackBack URL for this entry:

http://www.typepad.com/services/trackback/6a00d8341bfae553ef016304b6715c970d

Listed below are links to weblogs that reference Search Engine Competition with Network Externalities:

Comments

Post a comment