Service Design, Competition and Market Segmentation in Business Information Services with Data Updates

Abstract

Business information services are intermediaries that collect, collate,package and distribute information of value to professional users. Weconsider two technologies that such intermediaries may use fordelivering information. First, a packaged design that uses physicalmedia like CD-ROMs to distribute information. Second, an online servicethat delivers such information via the Internet or other onlinenetworks. We model a market where subscribers may choose between``self-service{''}, where they collect and collate information directlyfrom sources, and a third party service provider who provides either apackaged design or an online service. Subscribers are indexed by theirvolume of usage for the service. In a duopoly, we show that providerswith online or package technologies will serve different marketsegments. The package provider's limited ability to provide currentinformation, combined with decreasing search costs in an online servicewill make a package provider increasingly vulnerable to being driven outof the market by the online provider.