Price Competition and Endogenous Valuation in Search Advertising

Vol. XLVIII (June 2011), 566 –586 Lizhen Xu is a doctoral candidate, Red McCombs School of Business, The University of Texas at Austin (e-mail: [email protected]. utexas. edu) and will join College of Management, Georgia Institute of Technology as Assistant Professor of Information Technology Management. Jianqing Chen is Assistant Professor, School of Management, The University of Texas at Dallas, and Haskayne School of Business, The University of Calgary (e-mail: [email protected]). Andrew Whinston is Hugh Roy Cullen Centennial Chair in Business Administration, Red McCombs School of Business, The University of Texas at Austin (e-mail: abw@ uts.cc.utexas. edu). The authors thank the review team for their very detailed and constructive comments, which greatly improved the article. They also thank the seminar participants at Ohio State University, McMaster University, Fudan University, Shanghai University of Finance and Economics, Google, Dell, the Thirteenth Conference on Information Systems and Technology (2008), and the Seventh Workshop on e-Business (2008) for their helpful feedback. Jianqing Chen thanks the Social Sciences and Humanities Research Council of Canada for support. A previous version of this article was circulated under the title “To Place Better or Price Cheaper? Bidding and Pricing in Search Advertising.” John Hauser served as associate editor for this article. LIZHEN XU, JIANQING CHEN, and ANDREW WHINSTON*