James Christopher Westland
Production and marketing factors in the information services industry are examined
that may increase concentration in the hands of fewer producers, potentially
leading to monopoly formation. An economic model is developed of topic-specific
market concentration, and the factors are delineated that might cause monopolies
to occur in the markets of information database production firms. The model
shows that market concentration rises with: 1. inelastic demand, 2. reduced
marginal costs and efficient technology, and 3. increased data acquisition costs
exacerbated by low rates of data obsolescence. These effects are empirically
investigated in the Dialog Information Services Inc. group of databases. Corroborating
effects in the Dialog group of databases were observed for the tendency of high
prices, reflected in hourly connection charges, record print charges, and display
charges, to decrease concentration in topic-specific markets.