Article ID: | iaor201322 |
Volume: | 23 |
Issue: | 4 |
Start Page Number: | 1284 |
End Page Number: | 1302 |
Publication Date: | Dec 2012 |
Journal: | Information Systems Research |
Authors: | Whinston Andrew, Chen Jianqing, Xu Lizhen |
Keywords: | search, advertising, game theory, bidding |
This paper analyzes how the presence of organic listing as a competing information source affects advertisers' sponsored bidding and the equilibrium outcomes in search advertising. We consider a game‐theoretic model in which two firms bid for sponsored advertising slots provided by a monopolistic search engine and then compete for consumers in price in the product market. Firms are asymmetrically differentiated in market preference and are given different exposure in organic listing aligned with their market appeal. We identify two aspects of a firm's sponsored bidding incentive, namely, the