A simple model of advertisement on digital map

摘要

This paper builds a simple model to analyze advertisement on a digital map. In our model consumers search for a specific firm but might be lured to nearby firms. A map owner charges a lump sum fee and controls entry. We show that the map owner has incentive to manipulate the quality of firms on the map according to the level of consumers' switching propensity and advertisement aversion. Strong switching propensity and weak advertisement aversion would lead to higher average firm quality and higher entry fees in the equilibrium. And compared to a traditional search engine, it's optimal for the map owner to degrade the firms in the search pool, in response to the fact that the map owner cannot separate the pool of firms that are labeled on the map and firms that advertise.