Handbook of Media Economics, vol 1A

The timing of the game is as follows: First, media platforms choose their advertising

levels a

1

and a

2

and the search engine chooses x. In the second stage, the advertising mar-

ket clears—that is, p

0

, p

1

, and p

2

equalize demand and supply for each outlet. In the third

stage, consumers decide whether or not to use the search engine. Finally, those con-

sumers who use the search engine type in a query and visit the media platform suggested

by the search engine.

When deciding whether or not to use the search engine, a consumer knows x and has

an expectation about the advertising levels on the media platforms, denoted by a

i

e

. The

expected utility of a