Hagiu, Andrei and Jullien, Bruno (2013) Search Diversion and Platform Competition. TSE Working Paper, n. 13-431, Toulouse

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Platforms use search diversion in order to trade off total consumer traffic for higher revenues derived by exposing consumers to unsolicited products (e.g. advertising). We show that the entry of a platform competitor leads to higher (lower) equilibrium levels of search diversion relative to a monopoly platform when the degree of horizontal differentiation between platforms is intermediate (low). On the other hand, more intense competition between active platforms (i.e. less differentiation) leads to less search diversion.
When platforms charge consumers fixed access fees, all equilibrium levels of search diversion under platform competition are equal to the monopoly level, irrespective of the nature of competition. Furthermore, platforms that charge positive (negative) access fees to consumers have weaker (stronger) incentives to divert search relative to platforms that cannot charge such fees. Finally, endogenous affiliation on both sides (consumers and advertising) leads to stronger incentives to divert search relative to the one-sided
exogenous affiliation (vertical integration) benchmark, whenever the marginal advertiser derives higher profits per consumer exposure relative to the average advertiser.

Item Type: Monograph (Working Paper)
Language: English
Date: September 2013
Place of Publication: Toulouse
Divisions: TSE-R (Toulouse)
Institution: Université Toulouse Capitole
Site: UT1
Date Deposited: 09 Jul 2014 17:38
Last Modified: 02 Apr 2021 15:48
OAI Identifier: oai:tse-fr.eu:27585
URI: https://publications.ut-capitole.fr/id/eprint/15721

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