Matching Intermediaries for Information Goods in the Presence of Direct Search: An Examination of Switching Costs and Obsolescence of Information

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This paper investigates patterns of revenues earned by an intermediary that matches buyers and sellers in the presence of direct search markets. We develop a theoretical structure and a computer simulation model of such a marketplace where vendors are horizontally differentiated, and an intermediary matches clients to the optimal vendor for a fee. The model is applicable to information services such as application service providers (ASPs). The contribution of this paper is the identification of scenarios under which intermediaries that match clients and vendors are likely to be profitable considering switching costs and obsolescence of information.