Information acquisition from data-driven analytics: A perspective of blockchain service in a duopoly market

Abstract

In this research, we investigate a pricing problem for a blockchain service provider who sells data-driven analytics to two firms in a duopoly market, which acquires information to allow each downstream to know the market better. However, since the information is costly, each firm has to make a trade-off between the blockchain service cost of acquiring information and additional revenue generated from information acquisition. Due to the existence of major competitor, each firm has to take its rival’s reactions into consideration. In a Bertrand market, the four possible combinations of firm’s decision on whether acquiring information or not are illustrated. We find that it exists two pure strategy equilibria under certain conditions and one firm punishes its rival without incurring any cost. Further, we propose an efficient algorithm to find the optimal decision for blockchain service provider who prices service conservatively.