In Google we Trust?

Publicado también como: Barcelona GSE Working Paper Series nº 717. Barcelona: Barcelona Graduate School of Economics, February 2014 (September 2013)We examine the incentives of a monopolistic search engine, funded by advertising, to provide reliable search results. We distinguish two types of search results: sponsored and organic (not-paid-for). Organic results are most important in searches for online content, while sponsored results are more important in product searches. By modeling the underlying markets for online content and offline products, we can identify the sources of distortions for each type of result, and their interaction. This explicit treatment proves crucial for understanding, not only spillovers across markets, but also fundamental policy issues, such as the welfare effects of integration. In particular, integration of the engine with a small fraction of content providers is welfare-enhancing when incentives to distort are stronger for sponsored than organic search, but welfare-reducing in the opposite caseWe also acknowledge the financial support from the Spanish Ministry of Science and Innovation (grant: ECO2011-29663) and Generalitat de Catalunya (SGR 2014-2017)Peer Reviewe