Search Quality and Revenue Cannibalisation by Competing Search Engines

Journal of Economics & Management Strategy, Forthcoming

Posted: 29 Aug 2008 Last revised: 5 Aug 2014

See all articles by Greg Taylor

Greg Taylor

University of Oxford - Oxford Internet Institute

Date Written: March 6, 2012

Abstract

Consumers are attracted by high quality search results. Search engines, though, essentially compete against themselves as consumers are induced to substitute away from advertisement links when their organic counterparts are of high quality. I characterize the effect of such revenue cannibalisation upon equilibrium quality levels when search engines compete for customer clicks. Revenue cannibalisation provides an incentive for quality degradation, engendering low quality equilibria even when quality provision is costless. When consumers exhibit search engine loyalty there is a ceiling above which result quality cannot rise, regardless of what the maximum technologically feasible quality happens to be.

Keywords: search engines, vertical differentiation, organic links, advertising, sponsored search

JEL Classification: D43, L13, L15

Suggested Citation

Taylor, Greg, Search Quality and Revenue Cannibalisation by Competing Search Engines (March 6, 2012). Journal of Economics & Management Strategy, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1233282

Greg Taylor (Contact Author)

University of Oxford - Oxford Internet Institute ( email )

1 St. Giles
University of Oxford
Oxford OX1 3PG Oxfordshire, Oxfordshire OX1 3JS
United Kingdom

HOME PAGE: http://www.greg-taylor.co.uk

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