Design and Ownership of Two-Sided Networks: Implications for Internet Platforms
Journal of Management Information Systems
Ex Ante Information and the Design of Keyword Auctions
Information Systems Research
A “Position Paradox” in Sponsored Search Auctions
Marketing Science
Journal of Management Information Systems
Oligopolistic Pricing with Online Search
Journal of Management Information Systems
A model on location-based service as infomediary
Proceedings of the 14th Annual International Conference on Electronic Commerce
Research Note---Performance-Based Advertising: Advertising as Signals of Product Quality
Information Systems Research
Service design of consumer data intermediary for competitive individual targeting
Decision Support Systems
Effects of the Presence of Organic Listing in Search Advertising
Information Systems Research
Journal of Management Information Systems
Oligopolistic Pricing with Online Search
Journal of Management Information Systems
Vertical Differentiation and a Comparison of Online Advertising Models
Journal of Management Information Systems
Optimal keyword auctions for optimal user experiences
Decision Support Systems
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In this paper we pursue three main objectives: (1) to develop a model of an intermediated search market in which matching between consumers and firms takes place primarily via paid referrals; (2) to address the question of designing a suitable mechanism for selling referrals to firms; and (3) to characterize and analyze the firms' bidding strategies given consumers' equilibrium search behavior. To achieve these objectives we develop a two-stage model of search intermediaries in a vertically differentiated product market. In the first stage an intermediary chooses a search engine design that specifies to which extent a firm's search rank is determined by its bid and to which extent it is determined by the product offering's performance. In the second stage, based on the search engine design, competing firms place their open bids to be paid for each referral by the search engine. We find that the revenue-maximizing search engine design bases rankings on a weighted average of product performance and bid amount. Nonzero pure-strategy equilibria of the underlying discontinuous bidding game generally exist but are not robust with respect to noisy clicks in the system. We determine a unique nondegenerate mixed-strategy Nash equilibrium that is robust to noisy clicks. In this equilibrium firms of low product performance fully dissipate their rents, which are appropriated by the search intermediary and the firm with the better product. The firms' expected bid amounts are generally nonmonotonic in product performance and depend on the search engine design parameter. The intermediary's profit-maximizing design choice, by attributing a positive weight to the firms' bids, tends to obfuscate search results and reduce overall consumer surplus compared to the socially optimal design of fully transparent results ranked purely on product performance.