Return on Quality Improvements in Search Engine Marketing

In search engine marketing, such as on Google, advertisements' ranking and prices paid per click result from generalized, second-price, sealed bid auctions that weight the submitted bids for each keyword by the quality of an advertisement. Conventional wisdom suggests that advertisers can only benefit from improving their advertisement's quality. With an empirical study, this article shows that quality improvements have complex effects whose returns are actually unclear: 5% of all quality improvements to an advertisement lead to higher prices (measured by price per click) per keyword, 100% to a higher number of clicks, 53% to higher costs for search engine marketing, and 37% to lower profits. Quality improvements lead to higher weighted bids, which only lower prices if they do not improve the ranking of the advertisement. Otherwise, better ranks likely lead to higher prices. A decomposition method can disentangle these effects and explain their effects on search engine marketing costs and profits. Finally, the results indicate that advertisers benefit if they lower their bids after improvements to advertising quality.     

Schlechter Wein in alten Schläuchen—Eine Replik auf Helmedag

In der Januarausgabe des WIRTSCHAFTSDIENST ver?ffentlichten wir einen Aufsatz von Professor Fritz Helmedag über die „Abh?ngigkeit der Besch?ftigung von Steuern, Budgetdefiziten und L?hnen“. Hierzu eine Replik von Professor Bernd Lucke und eine Erwiderung von Professor Fritz Helmedag.     

Discovering the “customer annoyance iceberg” through evidence controlling

There is no doubt about the relevance of complaint management for customer retention. But complaint management-objectives can only be achieved if complaints registered by the firm give a comprehensive view of the annoyances perceived by customers. In fact, a considerable share of annoyed customers do not complain and many complaint articulations are not registered. Because of these “unvoiced” and “hidden” complaints, registered complaints show only the tip of the “annoyance iceberg” leading to misinterpretations and wrong allocation decisions. As a countermeasure, the concept of evidence-controlling is developed in this paper. Relevant key figures are identified, effective information gathering is demonstrated and managerial implications and open research questions are discussed.     

Granularity of Services

Service-oriented architectures are widely discussed as a design principle for application and enterprise architectures. Nevertheless, an adequate granularity of services has not yet been researched sufficiently from an economic perspective. The finer the granularity to realize the functions of a process, the higher the number of services is, and the more effort has to be directed towards composing them. In contrast, very coarse-grained services bear the disadvantages of higher implementation costs and lower reuse potential (e.g., in different processes). The aim of the decision model proposed in this paper is to determine an adequate granularity of services from an economical perspective. Thus, degrees of freedom, which often exist for the choice of granularity after a domain analysis, can be leveraged to realize a cost-efficient solution. We illustrate the applicability and practical benefits of the decision model with an example from the context of a financial services provider.     

Productivity and the Euro-Dollar exchange rate

This article analyses the impact of productivity developments in the United States and the euro area on the euro-dollar exchange rate. The article presents a new measure of relative average labour, productivity (ALP) which does not suffer from the biases implicit in readily available relative ALP data. Importantly, the patterns of these series differ widely. Employing the Johansen cointegration framework, four models are estimated using four different productivity proxies. Our results indicate that the extent to which productivity can explain the euro depreciation varies with the productivity proxy used: readily available measures explain most, our new, preferred measure least. In all models, however, productivity can explain only a fraction of the actual euro depreciation experienced in 1999–2000. JEL no. F31, C32, O47 The views expressed in this study are those of the authors and do not necessarily reflect those of the European Central Bank or its staff.     

A Multisectoral Econometric Model with Markets for Commodities and Financial Assets

The paper illustrates a multisector econometric model for the Federal Republic of Germany. A new model concept has been realized in two respects. First the model combines a disaggregated real system with a disaggregated monetary system. Second, both systems are disaggregated functionally (commodities) and institutionally (industries). This demands a specific theoretical structure and an appropriate database.; First a synopsis of the theoretical structure of the model is given. Afterwards an ex post solution of the model is discussed, which shows that the system works. Finally a simulation examines which effects a fall of the dollar has on the structure and the level of production and employment in the Federal Republic of Germany.