Greg Taylor
Microeconomist at the Oxford Internet Institute, University of Oxford

Research Papers & Publications

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Working Papers & Work in Progress

In many industries, consumers rely on endorsement from an intermediary when choosing between competing products. In this paper, we look at how the existence of contracts between firms and intermediaries affects the quality of the advice received by consumers, and firms' incentives to invest in improving the quality of their products. We consider a model with one intermediary and two firms who choose how much to invest. Under a variety of contractual environments (vertical integration, ex post endorsement) we show that, even though the intermediary tends to endorse the best firm, contractual endorsement distorts firms' incentives to invest. Quality can then decrease or increase compared to an objective benchmark. We contrast our approach to a setup with fixed qualities and endogenous prices, under which contractual endorsement hurts consumers.

Consumers tend to browse products in which they are interested and firms often choose to invest resources in selling to those consumers. I show that these observations imply that it is optimal for a firm to unilaterally increase the cost of browsing (even though this drives away potential customers) because doing so allows the firm to target its sales efforts at those consumers most likely to buy. Despite representing pure waste, artificially created search costs can increase welfare by facilitating the efficient allocation of sales or marketing resources. For a similar reason, consumers often benefit from search costs in aggregate, and prefer them to other means of screening such as increases in price. (This paper was previously titled "Browsing, Salesmanship, and the Welfare Consequences of Obfuscation".)

I consider the ex post effects of media content: consumers condition later browsing decisions upon ex post realised levels of satisfaction with content already consumed. This compels publishers to invest in satisfying consumers to generate advertiser rents that can subsequently be appropriated. More accurate ad targeting intensifies competition in product markets (as advertisers compete to serve consumers with precisely targeted needs), and thereby strengthens the imperative to rapidly arrest consumer (content) browsing with high-quality content. This dynamic is not unambiguously positive: enhanced content increases product prices, offsetting consumers' welfare gains, whilst better targeting or cheaper content may leave publishers worse-off. (This paper was previously titled "Attention Retention: Targeted Advertising and the Provision of Media Content".)

Peer Reviewed Journal Publications

We study the effects of integration between a search engine and a publisher. In a model in which the search engine (i) allocates users across publishers and (ii) competes with publishers to attract advertisers, we find that the search engine is biased against publishers that display many ads—even without integration. Integration can (but need not) lead to own-content bias. It can also benefit consumers by reducing the nuisance costs due to excessive advertising. Advertisers are more likely to suffer from integration than consumers. On net, the welfare effects of integration are ambiguous.

Consumers are attracted by high quality search results. Search engines, though, essentially compete against themselves as consumers are induced to substitute away from advertisement links when their organic counterparts are of high quality. I characterize the effect of such revenue cannibalisation upon equilibrium quality levels when search engines compete for customer clicks. Revenue cannibalisation provides an incentive for quality degradation, engendering low quality equilibria even when quality provision is costless. When consumers exhibit search engine loyalty there is a ceiling above which result quality cannot rise, regardless of what the maximum technologically feasible quality happens to be. (The working paper version was circulated with the British English title "Search Quality and Revenue Cannibalisation by Competing Search Engines"; a much earlier version of this paper was titled "Competing Search Engines with Utility Maximising Consumers and Ordinary Search Results").

A well-known myopic bidding strategy fails to support an equilibrium of simultaneous ascending proxy auctions for heterogeneous items when a hard-close rule is in place. This is because, in common with the single-auction case, last minute bidding (sniping) is a best response to naïve behaviour. However, a modification to the myopic strategy in which all bidders submit an additional bid in the closing stages of the auction—a practice I call 'defensive sniping'—is shown to yield an efficient, belief-free equilibrium of such environments. This equilibrium is essentially unique within the class of belief-free, efficient equilibria. (This paper was previously titled "Ending Rules in Simultaneous Ascending Auctions: Insights From Auctions on the Internet").

Sending general advertisements with inflationary claims may attract additional visitors with whom an advertiser is poorly matched. This is costly when ads are priced per-click because many visitors (clickers) will not purchase. This renders per-click advertising particularly conducive to the transmission of information via ads. The admissibility of information transmission depends not only on advertiser behaviour, but also upon consumers' interpretation of and trust in ads. In less conducive environments, consumers quickly learn to place little stock in the claims they see advertised. This mechanism undermines the ability of advertisers and consumers to communicate under per-impression or per-sale fee structures. Consumers benefit from increased informativeness, but distortions introduced by the market power given to advertisers imply that society may be better-off with no information transmission taking place.

Book Contributions & Other Publications