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Search Quality and Revenue Cannibalization by Competing Search Engines
Author(s) -
Taylor Greg
Publication year - 2013
Publication title -
journal of economics and management strategy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.672
H-Index - 68
eISSN - 1530-9134
pISSN - 1058-6407
DOI - 10.1111/jems.12027
Subject(s) - cannibalization , quality (philosophy) , revenue , incentive , loyalty , microeconomics , economics , brand loyalty , business , search cost , advertising , industrial organization , marketing , philosophy , accounting , epistemology
Consumers are attracted by high‐quality search results. Search engines, though, essentially compete against themselves because consumers are induced to substitute away from advertisement links when their organic counterparts are of high quality. I characterize the effect of such revenue cannibalization upon equilibrium quality when search engines compete for clicks. Cannibalization provides an incentive for quality degradation, engendering low‐quality equilibria—even when provision is costless. When consumers exhibit loyalty there is a ceiling above which result quality cannot rise, regardless of what the maximum feasible quality happens to be. Seemingly procompetitive developments may exert downward pressure on equilibrium quality.