Research Papers & Publications
- De Cornière, A., and G. Taylor (2013): "Endorsement Contracts and Product Quality". [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 payments by firms to an intermediary affect (i) the quality of the advice received by consumers, and (ii) firms' incentives to invest in improving the quality of their products. When contracts between firms and the intermediary can be based on firms' quality, we show that consumers are always directed towards the better firm. Quality can however be higher or lower than under a benchmark without payments. We explore alternative contractual environments in which quality is not contractible, and show that quality can increase or decrease depending on the nature of the contract. We relate these contracts to important applications (search engines, celebrity endorsement) and discuss policy implications.
If people browse sellers in whose products they expect to be interested then browsing acts as a signal of likely future purchase intent. I show that when a firm must employ sales resources to follow-up such leads it is always optimal for the firm to obfuscate the browsing process to allow it to target its sales efforts at those consumers who are most likely to buy---even though such obfuscation deters would be browsers and thus reduces the overall base of demand. Despite imposing a cost on consumers, obfuscation can be welfare-improving by facilitating the efficient use of sales or marketing resources.
- Taylor, G. (2013): "Attention Retention: Targeted Advertising and the Ex Post Role of Media Content". [working paper under revision]
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".)
- De Cornière, A., and G. Taylor (forthcoming): "Integration and Search Engine Bias", RAND Journal of Economics. [earlier working paper version]
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.
- Taylor, G. (2013): "Search Quality and Revenue Cannibalization by Competing Search Engines", Journal of Economics & Management Strategy, 22(3), 445–467. [working paper version] [published version] [supplementary appendix]
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").
- Taylor, G. (2012): "Defensive Sniping and Efficiency in Simultaneous Hard-Close Proxy Auctions", Journal of Mathematical Economics, 48(1), 51-58. [working paper version] [published version]
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").
- Taylor, G. (2011): "The Informativeness of On-line Advertising", International Journal of Industrial Organization, 29(6), 668-677. [working paper version] [published version]
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.
- Taylor, G. (forthcoming): "Scarcity of Attention for a Medium of Abundance: An Economic Perspective" in W. H. Dutton & M. Graham (eds.) Society and the Internet: How Information and Social Networks are Changing Our Lives, Oxford University Press, Oxford, UK.
- Graham, M., R. Schroeder, and G. Taylor (2014): "RE: Search", New Media & Society, 16(2), 187–194.
- Taylor, G. (2010): "What Makes Google Tick?", Economic Review, 28(2), 16–19.