Analysis Of The Price Behavior Of Our Search Engine Market Based On The Two-sided Market Perspectives

Two-sided markets theory began to cause the attention of international economic circles from the 21st century, currently it has been the hot issue in the industrial organization research, and it is a new brand doctrine which is based on theory of network externalities. Compared with the traditional one-sided market, Two-sided market involves three participants, the platform firm and two distinct participants, and the platform firm draw the two distinct participants to trade with each other on the platform. Examples of two-sided markets readily come to mind, such as shopping centers join consumers with merchants, exhibition centers join visitors and exhibitors,TaoBao joins buyer and seller.From the industrial character, the search engine market is a typical industry with the characteristic of two-sided markets, search engine firm joins both participants as a platform, one participant is individual user, the other participant is advertiser, there is negative network externalities between advertisers and individual users:advertisers make more advertisements, the platform is less attractive; Conversely, advertisers will make more advertisements if there are more individual users on the platform. This article analyzes pricing behavior of the search engine platform which is based on two-sided markets theory.In previous research, few scholars apply two-sided markets theory to the search engine market. The innovation of this paper is to use mathematical model to analyze the pricing behavior.This article first defines the search engine market, including the definition of search engine, search services, interests among participants, the analysis of supply and demand, and explains the characteristic of two-sided markets in the search engine market, next analyzes pricing behavior, including pricing theory, pricing strategies and pricing mode, and then analyzes the pricing behavior when platform establish vertical alliance and horizontal alliance through a mathematical model, finally analyzes pricing regulations theoretically. In the search engine market, the pricing issue is a hotspot research direction. This article catches hold of the core issue of the pricing behavior. Firstly, this article analyzes the skewed pricing strategy by creating a duopoly model to examine the influence of the relevant parameters, we come to a conclusion that with the increased aversion to the ads and the increased network externalities, the adverting costs will increase. In the analysis of the pricing mode, the search engine platform select two-part tarrif according to the factors to be considered, we come to a conclusion that the improvement of the matching degree of the search engine platform will reduce the registration fees of the advertisers. And then this article analyzes the pricing behavior when platform establish vertical alliance through a mathematical model, we come to a conclusion that vertical alliance will increase the profits of the search engine platform. Finally, considering the result of monopoly structure, we come to a conclusion that monopoly structure will lower advertising costs, search engine platform and advertisers both have higher profits.After the analysis of the pricing behavior, we discuss of regulation of skewed pricing strategy, we come to a conclusion that almost all of the search engine platform take a skewed pricing strategy. The cross-subsidies occurs between two interdependent groups which aims to attract individual users and advertisers to the search engine platform to promote transactions, so it is a rational pricing behavior. In other words, the skewed pricing strategy is to address the "egg or chicken" problem between users and advertisers, this pricing strategy is a long-term stable behavior which is different from cross-subsidization in the one-sided market and not belongs to predatory pricing. Therefore, antitrust authorities should not regulate the skewed pricing strategy.The final part of this article is summing up content and deficiency of the research, then points out future direction of the research of our search engine market.