Exclusive Preferential Placement as Search Diversion: Evidence from Flight Search

We analyze the incentives for a two-sided intermediary to divert consumers to its favored destinations. Using a quasi-experiment to control for search intent, we identify and measure the impact of a search engine’s exclusive award of preferential placement to its own service. We find that Google’s differential placement of its Flight Search service led to a 65% decrease in click-through rates for non-paid algorithmic links and an 85% increase in click-through rates for paid advertising listings of competing online travel agencies. Moreover, the exclusive integration of search engine services into search results disproportionately impacted traffic to popular sites. JEL classification: L21, L40, L86