Work

Market Effects of Brand Search Advertising

Year: 2026

Type: article

Abstract: ABSTRACT We study the market effects of sponsored search auctions for advertising space on searches for brands. In our model, firms simultaneously choose the price of their product and the bids for the advertising auctions triggered by their own and rivals' brand keywords search. In any symmetric equilibrium, each firm wins its own keyword auction, and relative to a no‐ads benchmark, online advertising raises the winning brand's marginal cost and ultimately market prices. Only in an environment with strong initial asymmetries do we find that brand advertising might be beneficial.

Source: The RAND Journal of Economics

DOI: 10.1111/1756-2171.70060

Authors: Massimo Motta, Antonio Penta

Institutions: Institució Catalana de Recerca i Estudis Avançats, Universitat Pompeu Fabra, Toulouse School of Economics

Language: English

Topic: Auction Theory and Applications

Subfield: Management Science and Operations Research

Field: Decision Sciences

Domain: Social Sciences

Open Access status: hybrid

Estimated APC paid: $3,400

Funders: Fundación BBVA, European Research Council