Google's monopoly and the price of inertia

Google knows that when confronted with a search engine that comes as a default, most of us won’t expend the mental energy to seek out a new search engine, writes Ananish Chaudhuri.

google search

Opinion: This past week saw the start of the trial pitting Google against the US justice department. A key complaint against Google is that the company has paid huge amounts of money to manufacturers like Apple as well as mobile carriers to make Google the default search engine on computers and phones. The US government alleges that as a result, Google has accumulated almost monopolistic control of the US search engine market.

The case has similarities to one brought against Microsoft nearly twenty-five years ago when Microsoft started bundling its Internet Explorer browser as part of the operating system in an effort to drive out Netscape’s Navigator. This kind of market power and lack of competition allows tech giants to over-charge advertisers compared to what they would pay in a competitive environment.

Google currently enjoys a lion’s share of search advertising revenue and shuts out rivals - big ones like Microsoft’s Bing and smaller ones like DuckDuckGo. The search engine giant, however, claims that customers can easily choose to use a different search engine via a few simple taps on their device. This may be the case, but the way that consumers typically act means that the fastest and easiest option usually takes precedence.

A columnist in the New York Times gave the following comparison: suppose you went to the supermarket and all the shopping carts had a box of the most popular cereal in them already. Google is saying that this is not a problem since all you need to do is to walk over to the cereal aisle, put the pre-loaded box back and grab your favourite one.

But it’s really not that simple, and even if it were, Google knows full well that the majority of people will just grab the box already in their cart and pay for it. This mental inertia, the desire to accept the default option, seems hardwired in us.

Ananish Chaudhuri is Professor of Experimental Economics at the University of Auckland Business School.
Ananish Chaudhuri is Professor of Experimental Economics at the University of Auckland Business School.

Consider this scenario featuring ‘Thelma and Louise’. The friends have just accepted job offers with the same salary at two different but very similar companies. As Thelma is filling out various HR forms, she comes across the following: ‘You can choose to enrol in Kiwisaver. If you do so, the company will match your contributions up to 4 percent. Please check the box below if you wish to enrol.’

Louise, however, comes across a slightly different version: ‘We will automatically enrol you in Kiwisaver. We will put 4 percent of your salary in Kiwisaver every month and the company will match this amount. Please check the box below if you do not wish to enrol.’

Before proceeding let us understand that the implication is the same in both cases. Someone who makes $4000 a month, can choose to contribute $160 a month to Kiwisaver and if they choose to do so, then the employer will provide an additional $160. This is a saving of $320 per month or $3840 per year. Over many years this amounts to substantial savings.

Here is the kicker. Most Thelmas of the world will end up with much less in lifetime saving than Louises. This is because confronted with having to check a box to join, where the default option is not joining, many Thelmas will not check the box to opt in and end up not joining Kiwisaver. On the other hand, Louises, who are enrolled in Kiwisaver by default and need to check a box to opt-out of Kiwisaver, will also not check the box. But the Louises will remain enrolled by default and will end up saving more over their lifetime.

Google knows that when confronted with a search engine that comes as a default, most of us won’t expend the mental energy to seek out a new search engine and we’ll end up using Google.

In the US, viewers of Fox News and CNN increasingly inhabit separate universes with diametrically opposed views on a multitude of matters. The same is going to become true online. People who use Google will get a different view of reality than someone using a different search engine, and increasingly, Google will get to decide what information we get access to. It already decides what we get to see when we search for information.

The current case against Google will have wide-ranging ramifications for a variety of reasons, including on the robustness of civic discourse; what views we get to hear and what not.

Competition, whether in technology or in the market for ideas, is the best antidote to authoritarianism. But the rise of big tech has the potential to deprive us of access to a multitude of views and a robust exchange of ideas. These problems will be compounded by the advent of AI, but that’s a debate for a different day.

Ananish Chaudhuri is professor of economics at the University of Auckland and author of the forthcoming book Economics: A Global Introduction.

This article reflects the opinion of the author and not necessarily the views of Waipapa Taumata Rau University of Auckland.

It was first published by Interest

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