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Service Design and Price Competition in Business Information Services

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  • T. C. A. Bashyam

    (1816 Purdue Avenue, Apartment 204, Los Angeles California 90025)

Abstract

We examine two competing technologies for delivering business information to professional subscribers: first, a package service that delivers information using physical media, such as CD-ROMs; second, an online service that allows subscribers to access information over online networks. We model the information services market as a duopoly, where each information service provider is equipped with either packaged or online information delivery technology. They compete for potential subscribers characterized by their usage volume. Subscribers may also choose “self-service,” wherein they collect and collate information directly from the source. Service design for information service providers must specify their information delivery technology and the size of the database they provide. Service providers first commit to a service design and then enter a price competition phase, where they choose the parameters of their feasible pricing strategies. Specifically, a package service provider chooses a fixed charge for subscription. An online provider chooses both a fixed charge and a marginal charge, because it is possible to meter usage in that technology. We show that the package provider serves high volume subscribers while the online provider serves low volume subscribers. We also derive bounds on equilibrium database sizes, prices, and market shares for each provider.

Suggested Citation

  • T. C. A. Bashyam, 2000. "Service Design and Price Competition in Business Information Services," Operations Research, INFORMS, vol. 48(3), pages 362-375, June.
    • Handle: RePEc:inm:oropre:v:48:y:2000:i:3:p:362-375
    DOI: 10.1287/opre.48.3.362.12434
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    References listed on IDEAS

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    1. K. Sridhar Moorthy, 1988. "Product and Price Competition in a Duopoly," Marketing Science, INFORMS, vol. 7(2), pages 141-168.
    2. Bashyam, T. C. A., 1996. "Competitive capacity expansion under demand uncertainty," European Journal of Operational Research, Elsevier, vol. 95(1), pages 89-114, November.
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    4. Lars-Hendrik Röller & Mihkel M. Tombak, 1993. "Competition and Investment in Flexible Technologies," Management Science, INFORMS, vol. 39(1), pages 107-114, January.
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    Cited by:

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    2. Ashish Arora & Andrea Fosfuri, 2005. "Pricing Diagnostic Information," Management Science, INFORMS, vol. 51(7), pages 1092-1100, July.
    3. Sanjay Jain & P. K. Kannan, 2002. "Pricing of Information Products on Online Servers: Issues, Models, and Analysis," Management Science, INFORMS, vol. 48(9), pages 1123-1142, September.
    4. Patrice Marcotte & Anne Mercier & Gilles Savard & Vedat Verter, 2009. "Toll Policies for Mitigating Hazardous Materials Transport Risk," Transportation Science, INFORMS, vol. 43(2), pages 228-243, May.
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    6. Luce Brotcorne & Martine Labbé & Patrice Marcotte & Gilles Savard, 2008. "Joint Design and Pricing on a Network," Operations Research, INFORMS, vol. 56(5), pages 1104-1115, October.
    7. Barış Ata & Tava Lennon Olsen, 2009. "Near-Optimal Dynamic Lead-Time Quotation and Scheduling Under Convex-Concave Customer Delay Costs," Operations Research, INFORMS, vol. 57(3), pages 753-768, June.

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