Abstract

http://ssrn.com/abstract=1808624
 
 

References (50)



 
 

Citations (4)



 


 



Search Engine Competition with Network Externalities


Cédric Argenton


Tilburg Law and Economics Center (TILEC); Tilburg University - Center and Faculty of Economics and Business Administration

Jens Prufer


Tilburg University - CentER; Tilburg University - Law and Economics Center (TILEC); Tilburg University - Department of Organization & Strategy

April 13, 2011

TILEC Discussion Paper No. 2011-024

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 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 the empirically observed development since 2003 well. We find that there is a strong tendency towards 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.

Number of Pages in PDF File: 29

Keywords: Search engines, network externalities, query logs, antitrust, regulation

JEL Classification: L10, K23, L86

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Date posted: April 19, 2011  

Suggested Citation

Argenton, Cédric and Prufer, Jens, Search Engine Competition with Network Externalities (April 13, 2011). TILEC Discussion Paper No. 2011-024. Available at SSRN: http://ssrn.com/abstract=1808624 or http://dx.doi.org/10.2139/ssrn.1808624

Contact Information

Cédric Argenton (Contact Author)
Tilburg Law and Economics Center (TILEC) ( email )
Warandelaan 2
Tilburg, 5000 LE
Netherlands
Tilburg University - Center and Faculty of Economics and Business Administration ( email )
P.O. Box 90153
Tilburg, 5000 LE
Netherlands
Jens Prufer
Tilburg University - CentER ( email )
P.O. Box 90153
Tilburg, DC 5000 LE
Netherlands
Tilburg University - Law and Economics Center (TILEC) ( email )
Warandelaan 2
Tilburg, 5000 LE
Netherlands
Tilburg University - Department of Organization & Strategy ( email )
Netherlands
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