Assigning Default Position for Digital Goods: Competition, Regulation, and Welfare

A-Tier
Journal: Journal of Industrial Economics
Year: 2025
Volume: 73
Issue: 3
Pages: 426-445

Authors (2)

Yongmin Chen (University of Colorado) Marius Schwartz (not in RePEc)

Score contribution per author:

2.018 = (α=2.02 / 2 authors) × 2.0x A-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

We analyze alternative ways to assign the default position for digital goods like search engines. When two competing firms vie for the default through bidding, the higher‐quality firm typically wins but delivers lower utility than the rival due to heightened monetization from exploiting consumer switching costs. The distribution of consumer switching costs plays a crucial role in driving the bidding outcome and welfare results. Paradoxically, increasing via regulation the rival's default share tends to raise profit and harm consumers, at least in the short run. Letting consumers choose the default benefits them in the short run, but harms the weaker firm.

Technical Details

RePEc Handle
repec:bla:jindec:v:73:y:2025:i:3:p:426-445
Journal Field
Industrial Organization
Author Count
2
Added to Database
2026-01-25