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Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/28438
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| Title: | Quality Uncertainty And Adverse Selection In Sponsored Search Markets |
| Authors: | Animesh, Animesh - University of Maryland
Ramachandran, Vandana - University of Maryland
Viswanathan, Siva - University of Maryland |
| Keywords: | sponsored search, keyword advertising, pay-for-performance, search,
credence, experience |
| Issue Date: | 2005 |
| Series/Report no.: | NET Institute Working Paper;05-27 |
| Abstract: | Sponsored search mechanisms, where advertisers bid for placement to be
as close to the top in the listing of search results, are the fastest
growing among online search models. Sponsored search in popular search
services such as Google and Yahoo! employ an auction mechanism wherein
firms can bid, for a better placement in the (sponsored) search results,
on relevant keywords used by consumers in their search process. This
provides an unprecedented opportunity to test some of the predictions of
earlier research relating quality and advertising, in the online
setting. While sponsored search mechanisms have been gaining popularity,
they can potentially introduce a bias in the listing of search results.
In particular, sponsored search mechanisms that enable low quality
bidders to be placed at the top of the search listings can adversely
affect consumer welfare. Our study uses data from online sponsored
search auctions to examine the relationship between advertisers' quality
and their bidding strategies. Specifically we seek to understand if
advertisers' bidding strategies differ across products characterized by
different degrees of quality-uncertainty. Our results indicate that
there are significant differences in the bidding strategies of sellers
of search goods as compared to sellers of experience and credence goods,
and that there is significant adverse selection in product categories
characterized by greater uncertainty. We discuss the implications of our
findings for consumers, advertisers, and intermediaries and provide
directions for future research in this emerging context. |
| URI: | http://hdl.handle.net/2451/28438 |
| Appears in Collections: | NET Institute Working Papers Series
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