Abstract
We investigate Amazon's ability to direct user clicks to more visually prominent search results, even as quality declines with the increasing prevalence of sponsored advertising products. We analyze product results from over 2,000 Amazon Marketplace search queries to estimate how a top three most clicked product's features (price and quality) and screen placement influence a user's clicks. Our econometric results show that the position of a product search result (“position bias”), adjusted for its relative prominence on the screen, strongly shapes whether a user clicks on it. Within the top five search results, where typically four are advertisements, users exhibit decreased sensitivity to a product's relevance or pricing. This allows Amazon's sponsored ads to leverage product prominence as a mechanism for rent extraction from users and producers. Regulatory frameworks might limit platforms from exploiting consumers' satisficing behaviour online, including via moderating excessive advertising in algorithmic search results.
•We analyze the top-3 most clicked products from over 2,000 Amazon Marketplace searches.•On average, top-3 most clicked ads are 17% more expensive and one-third less relevant than their organic counterparts.•Clicks are strongly predicted by both the visual prominence and relevance of search results.•Users are less sensitive to the relevance and price of products in the 5 most prominent spots, 4 of which are typically ads.•Amazon can steer user attention toward chosen results, extracting rents from firms now unable to capture it without paying.