Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/27393
Authors: 
Sapi, Geza
Suleymanova, Irina
Year of Publication: 
2009
Series/Report no.: 
DIW Discussion Papers 870
Abstract: 
We propose a duopoly model of competition between internet search engines endowed with different technologies and study the effects of an agreement where the more advanced firm shares its technology with the inferior one. We show that the superior firm enters the agreement only if it results in a large enough increase in demand for advertising space at the competing .rm and a relatively small improvement of the competitor's search quality. Although the superior firm gains market share, the agreement is beneficial for the inferior firm, as the later firm's additional revenues from a higher advertising demand outweigh its losses due to a smaller user pool. The cooperation is likely to be in line with the advertisers' interests and to be detrimental to users' welfare.
Subjects: 
Search engine
two-sided market
advertising
strategic complements
technology
JEL: 
L13
L24
L86
M37
Document Type: 
Working Paper

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