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Vertical Integration and Antitrust in Search Markets

35 Pages Posted: 23 Sep 2015 Last revised: 6 May 2016

Lesley Chiou

Occidental College - Department of Economics

Date Written: May 5, 2016

Abstract

Antitrust regulators are concerned that vertical integration may allow a dominant firm in one market to lever market power into another market. Theoretically, the effects of vertical integration on other firms in the market are ambiguous. This paper studies how a dominant search engine Google in the upstream market of Internet search enters into different downstream markets. I find that Google's vertical integration either decreases or increases clicks to other sites, depending upon whether firms compete in pricing or quality and whether consumers are very price-sensitive. The results have direct public policy implications as regulators determine antitrust policy in newly emerging markets.

Keywords: antitrust, tying, online, Internet, consumer search, vertical integration, Google

JEL Classification: L40, L86

Suggested Citation

Chiou, Lesley, Vertical Integration and Antitrust in Search Markets (May 5, 2016). Available at SSRN: https://ssrn.com/abstract=2663557 or http://dx.doi.org/10.2139/ssrn.2663557

Lesley Chiou (Contact Author)

Occidental College - Department of Economics ( email )

1600 Campus Road
Los Angeles, CA 90041
United States

HOME PAGE: http://www.faculty.oxy.edu/lchiou

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