A simple model of search engine pricing

Research output: Working paper / PreprintDiscussion paper


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 encourages 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.
Original languageEnglish
Place of PublicationTel Aviv
PublisherPinhas Sapir Center for Development, Tel Aviv University
Number of pages12
StatePublished - 2010

Publication series

NameDiscussion paper (The Pinhas Sapir center for development)
PublisherThe Pinhas Sapir center for development

ULI Keywords

  • uli
  • Internet searching -- Prices -- Mathematical models


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