Impact of Search Engine Ownership on Underlying Market for Goods and Services

Search engines are an important part of electronic commerce as they are the most common tools used by buyers and sellers alike. Search engine owners can determine the set of products/firms listed, the order of appearance in the search list and other policies that affect the value of the search engine to the buyers and sellers. Correspondingly, the entity that owns the search engine has special market power that affects the underlying market for goods and services over which the search engine operates. We consider a number of models of the market as a differentiated goods oligopoly in which the search engine is owned by different entities: a monopolist information provider, a producer, a consortium of buyers, and a benign social welfare maximizer. We show that a producer would prefer to have its competitor own the search engine rather than have a information monopolist own the engine. We also show that under some circumstances, a monopolist search engine owner may increase the social welfare.