Thursday, December 12, 2013
Roberto Burguet, Ramon Caminal and Matthew Ellman (all Institut d'Analisi Economica CSIC, and Barcelona GSE) ask In Google We Trust?
ABSTRACT: In a micro-founded model, we derive novel incentives for a monopoly search engine to distort its organic and its sponsored results on searches for online content and offline products. Distorting organic results towards content publishers with less effective display advertising and/or distorting sponsored results towards higher margin merchants (by underweighting consumer relevance in search auctions) increase per capita revenues but lower participation. The interplay of these incentives determines search bias and welfare. We also characterize how the welfare consequences of integration into display advertising, as intermediary or publisher, depend on asymmetries, monopolization and targeting.