Research Seminar
Assimilation or Differentiation? Investigating the Effect of Competition on Sponsored Search Advertisers’ Keyword Decisions
| Abstract: | As Internet advertising infomediaries now provide rich competition-related information, sponsored search advertisers are becoming more strategic in their keyword decisions. In this study, we regard each keyword as a market and empirically examine whether positive or negative spillover effects occur in advertisers’ keyword entry decisions, which lead to assimilation or differentiation in their keyword choices. We develop a model of advertisers’ keyword decisions based on the incomplete-information and simultaneous-move game with two novel extensions: (i) we allow the strategic interactions to vary with advertisement positions to reflect consumers’ top-down search pattern; and (ii) we infer potential entrants of a keyword by modeling the advertisers’ keyword consideration process to capture their limited capacity in analyzing all existing keywords. To cope with several econometric challenges, we use a two-step approach in conjunction with the Bayesian method to estimate the model. We apply the proposed model to a panel dataset of 1,252 laptop-related keywords mainly used by 28 manufacturers, retailers, and comparison websites that advertise on Google. Several key findings emerge from our analysis. First, the expected number of below-ranked advertisers has a positive spillover effect on all three types of advertisers’ keyword entry decisions. Second, for the strategic interactions with advertisements ranked above, we find both assimilation and differentiation tendencies. Retailers are the most aggressive and assimilate with all three types of advertisers, and comparison sites are the least aggressive and differentiate from other comparison sites and manufacturers. Third, both manufacturers and retailers are more likely to use historical competition information to learn from other advertisers of the same type, while comparison sites tend to learn from other comparison sites and retailers. Finally, our counterfactual simulations demonstrate that more accurate competition |
| Date: | Jun 2 (Tue), 2015 2:30 pm - 4:00 pm |
| Time: | 2:30PM - 4:00PM |
| Speaker: | Prof. Sha Yang, Professor of Marketing, Marshall School of Business, University of Southern California, USA |
| Venue: | Room 14-222, 14/F, Academic Building (3), CityU |
+852 3442-8989
+852 3442-0151
