Lattice games and the economics of aggregators

We model the strategic decisions of web sites in content markets, where sites may reduce user search cost by aggregating content. Example aggregations include political news, technology, and other niche-topic websites. We model this market scenario as an extensive form game of complete information, where sites choose a set of content to aggregate and users associate with sites that are nearest to their interests. Thus, our scenario is a location game in which sites choose to aggregate content at a certain point in user-preference space, and our choice of distance metric, Jacquard distance, induces a lattice structure on the game. We provide two variants of this scenario: one where users associate with the first site to enter amongst sites of equal distances, and a second where users choose uniformly between sites at equal distances. We show that subgame perfect Nash equilibria exist for both games. While it appears to be computationally hard to compute equilibria in both games, we show a polynomial-time satisficing strategy called Frontier Descent for the first game. A satisficing strategy is not a best response, but ensures that earlier sites will have positive profits, assuming all subsequent sites also have positive profits. By contrast, we show that the second game has no satisficing solution.