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A Google monopoly stands in the way of innovation

Search engines such as Google, Yahoo and Bing do not share information about the way in which consumers use their services or the sites they visit. They should be required to do so, believes economist Jens Prüfer. If one party holds an extremely dominant position, as Google does, this stifles innovation and hampers efforts to improve the quality of search results. “Search engines now play such a major role in our lives that faster innovation can make a significant difference,” Prüfer contends. “But Google is not eager to share data. It would seem that market domination is more important than product innovation.”

Algorithms

In their research* Jens Prüfer and his colleagues examine the ‘self-learning’ algorithms on which Google and other search engines are based. The quality and precision of those algorithms depends on the knowledge derived from user interaction. In short, the more the search engine is used, the faster it learns. Because Google holds a near-monopoly, its advantage over the competition is growing by the day.

Google has a market share of over 90% but is it actually the best search engine? “We can’t say whether Google’s algorithm is intrinsically better than anyone else’s,” states Prüfer. “To determine that, it would be necessary for all search engines to share information about user behavior. Competition would then be based solely on the quality of the algorithm. This would encourage innovation in pursuit of a higher market share, which in turn would lead to search results of higher quality and thus consumer benefit.” The researchers have forwarded their findings to the US Department of Justice and the European Commission in the hope that these regulatory bodies will take action.

Jens Prüfer, Assistant Professor, Department Economics

Dr. Jens Prüfer is affiliated with TILEC and the Tilburg School of Economics and Management (TiSEM), where he is Academic Director of the Master’s program in Economics. His research is very broad, encompassing institutional economics, law, management, computer science and even religion. He studied Economics at the University of Tübingen (Germany), Chinese Studies at the University of Singapore, and was awarded his doctorate by Goethe University, Frankfurt. Jens Prüfer is editor of the Society for Institutional and Organizational Economics website at www.sioe.org.

*Sources: Prüfer J. and Christoph Schottmüller: Competing with Big Data, TILEC/CentER Discussion Paper 2017; Prüfer J. and Cédric Argenton: Search Engine Competition with Network Externalities, Journal of Competition, Law and Economics 2012; Science Guide 3 May 2011, and Me Judice.

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