Why Do Intermediaries Divert Search?

Hagiu, Andrei

doi:10.2139/ssrn.1010682

Cited by 61 publications

(69 citation statements)

References 36 publications

(52 reference statements)

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“…Armstrong et al (2009) analyse price competition with sequential consumer search, where one firm appears first in the consumersÕ search list. Finally, the main result in this article is also reminiscent of Hagiu and Jullien (2011), who make a similar point -namely, that platforms in two-sided markets may have an incentive to put obstacles on consumer search -in the context of a very different twosided-market model.…”

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confidence: 72%

A Simple Model of Search Engine Pricing

Eliaz

Spiegler

2011

The Economic Journal

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We present a simple model of how a monopolistic search engine optimally determines the average quality of firms in its search pool. In our model, there is a continuum of consumers, who use the search engine's pool, and there is a continuum of firms, whose entry to the pool is restricted by a price set by the search engine. We show that a monopolistic search engine may have an incentive to set a relatively low price that encouarges low-relevance advertisers to enter the search pool. This conclusion is independent of whether the search engine charges a price per click or a fixed access fee.

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confidence: 72%

A Simple Model of Search Engine Pricing

Eliaz

Spiegler

2011

The Economic Journal

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“…Some works within this tradition (e.g. Hagiu and Jullien (2011)) explicitly address search platforms. One can view the consumer's signal in our model as a (sole) platform to which he has access.…”

Section: Related Literaturementioning

confidence: 99%

Search Design and Broad Matching

Eliaz¹,

Spiegler²

2016

American Economic Review

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We study decentralized mechanisms for allocating …rms into search pools. The pools are created in response to noisy preference signals provided by consumers, who then browse the pools via costly random sequential search. Surplus-maximizing search pools are implementable in symmetric Nash equilibrium. Full extraction of the maximal surplus is implementable if and only if the distribution of consumer types satis…es a set of simple inequalities, which involve the relative fractions of consumers who like di¤erent products and the Bhattacharyya coe¢ cient of similarity between their conditional signal distributions. The optimal mechanism can be simulated by a "keyword auction" with "broad matching". (JEL D02, D47, D82).Consider a consumer who has a certain need and looks for a product that will satisfy it. When confronted with a particular product, the consumer can identify whether he wants it. However, when he …rst embarks on the search process, he is unable to provide an exact description of his need, and can only submit an imprecise "query" that …ts several product types. How should a benevolent planner react to the consumer's query? If he gives the consumer a single item, he risks ending up with a poor match. Instead, the planner may provide the consumer with a set of options to browse. If search is time-consuming, the planner should design the set in order to balance two considerations: maximizing the probability that the consumer will …nd what he is looking for, and minimizing the amount of time it will take him to …nd it. In other words, the planner's problem is to design the consumer's "search environment". The consumer's predicament is prevalent in other environments. When an employer approaches a Human Resource agency with an intention to hire a new worker, the most he can usually do is list a few characteristics that vaguely describe the kind of worker he is looking for. Likewise, when we look for a rental apartment through a real-estate agent, we typically describe only broad characteristics (location, size, amenities). A more modern example is online search, where users submit queries that often contain general and imprecise keywords. Imagine that you look for a speci…c piece of instrumental music on YouTube, but you forgot its name. You would recognize it instantaneously if you heard it, but the only information you can supply to YouTube is the piece's genre. Finally, there are cases in which the consumer passively conveys information. For instance, in contemporary online platforms, the "cookies"on users'computers describe their navigation history, which may be correlated with their current needs.We attempt to capture situations of this kind with a simple model, in which every consumer is interested in only one type of product and can provide only one particular description or "query"concerning this product. Each product type is supplied by a continuum of …rms; and when the consumer is given a subset of …rms, he browses it using the most 1 basic search technology in the literature: random sequen...

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“…In this section we lay out the foundation for our analysis using a variant of the model in Hagiu and Jullien (2011). We present the model here but postpone its discussion until after proposition 1, where it will be more transparent.…”

Section: Monopoly Platform Set-upmentioning

confidence: 99%

“…we do not endogenize price-setting by independent sellers. Some of these extensions are treated by Hagiu and Jullien (2011) in the context of a monopoly platform choosing search diversion. Finally, while the assumption u 2 = 0 best …ts contexts in which product 2 is advertising (as in the examples listed in Table 1 above), the general implications we derive hold for any platforms that have incentives to divert consumers away from the products that best suit their preferences and towards products they are lessbut still positively -interested in (u 2 > 0).…”

Section: Optimal Search Diversionmentioning

confidence: 99%

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Search diversion and platform competition

Hagiu

Jullien

2014

International Journal of Industrial Organization

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Platforms use search diversion in order to trade o¤ total consumer tra¢ c for higher revenues derived by exposing consumers to unsolicited products (e.g. advertising). We show that competition between platforms leads to lower equilibrium levels of search diversion relative to a monopoly platform when the intensity of competition is high. On the other hand, if there is only mild competition, then competing platforms induce more search diversion relative to a platform monopolist.When platforms charge consumers …xed access fees, all equilibrium levels of search diversion under platform competition are equal to the monopoly level, irrespective of the nature of competition. Furthermore, relative to platforms that cannot charge such fees, platforms that charge positive (negative) access fees to consumers have weaker (stronger) incentives to divert search.

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Why Do Intermediaries Divert Search?

Cited by 61 publications

References 36 publications

A Simple Model of Search Engine Pricing

A Simple Model of Search Engine Pricing

Search Design and Broad Matching

Search diversion and platform competition

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