admin | 
07 14th, 2009| 
ChoicePoint is an Alpharetta, Georgia-based company that sells information in three markets–insurance, business and government, and marketing. According to a recent quarterly statement filed at the Security and Exchange Commission, ChoicePoint sells: claims history data, motor vehicle records, police records, credit information and modeling services…employment background screenings and drug testing administration services, public record searches, vital record services, credential verification, due diligence information, Uniform Commercial Code searches and filings, DNA identification services, authentication services and people and shareholder locator information searches…print fulfillment, teleservices, database and campaign management services…
ChoicePoint has managed to attain a large share of the commercial data broker (CDB) market with strategic purchases of other businesses. Since its spinoff from Equifax in 1997, ChoicePoint has acquired a number of information collection and processing companies. These include:
National Data Retrieval, Inc., a provider of public records information; List Source, Inc., d/b/a Kramer Lead Marketing Group, a marketing company in the life and health insurance and financial services markets; Mortgage Asset Research Institute, Inc., a mortgage fraud monitoring company; Identico Systems, LLC, a customer identity verification company; Templar Corporation; insuranceDecisions, Inc., an insurance industry claims administration company; Bridger Systems, Inc., a USA PATRIOT Act compliance company; CITI NETWORK, Inc. d/b/a Applicant Screening and Processing, a tenant screening company; TML Information Services, Inc., a provider of motor vehicle reports; Drug Free, Inc., a drug testing company; National Drug Testing, Inc., a drug testing company; Application Profiles, Inc., a background check company; Informus Corporation; a company enabling ChoicePoint to offer products online; Tyler-McLennon, Inc., a background screening company; ChoicePoint Direct Inc., formerly known as Customer Development Corporation, a database marketing company; EquiSearch Services, Inc.; DATEQ Information Network, Inc., an insurance underwriting services company; Washington Document Service, Inc., a court record retrieval service; DataTracks Technology, Inc., a public record information company; DataMart, Inc., a database software company; Statewide Data Services, Inc; NSA Resources, Inc., a drug testing company; DBT Online, Inc., a public record services provider; RRS Police Records Management, Inc., a provider of police reports and related services; VIS’N Service Corporation; Cat Data Group, LLC; Drug Free Consortium, a drug testing company; BTi Employee Screening Services, Inc., an employee pre-screening services company; ABI Consulting Inc., a drug screening company; Insurity Solutions, Inc., an insurance rating company; National Medical Review Offices, Inc.; Bode Technology Group, Inc., a DNA identification company; Marketing Information Technology, Inc., a direct marketing company; Pinkerton’s, Inc., a preemployment screening company; Total eData Corporation, an e-mail database company; LS Report Service, Inc., a provider of police records; Resident Data, Inc., a residential screening services provider; Vital Chek Network, Inc., a provider of vital records; Accident Report Services, Inc., a provider of police records; Programming Resources Company, insurance software company; Professional Test Administrators, Inc., a drug testing company; CDB Infotek, a seller of public records; Medical Information Network, LLC, an online physician verification service; and Rapsheets.com, an online provider of criminal records data.
Many markets - esp. media-related markets such as magazines, newspapers, websites, tv channels etc. have fragmented and are increasingly catering to niche audiences.
Other markets - banks, steel, enterprise software etc. have consolidated over time.
Can an economist or some financial expert point me to the fundamental forces in play that determine whether a market will fragment or consolidate over time ?
1. Generic goods ________, while heavily-advertised brands ___________.
A) Are inferior goods; are normal goods
B) Emphasize value; emphasize quality
C) Appeal to brand loyalty; appeal to value loyalty
D) All of the above.
E) Both A and B.
I said D
2. Apple refuses to license its music copy-protection software to non-iPod players because
A) its partnering iTunes Music Store only wants its songs to be playable on iPods.
B) it wants to lock in its iPod customers by making their iTunes song non-playable on competing players.
C) Apple makes more money from selling iTunes songs than from selling iPods.
D) it wants to maintain premium prices on its iTunes songs.
I said B
3. Which products will reward buyers who can afford to wait?
A) Standardized products in a saturated market.
B) Perishable used items with high Consumer Reports rating.
C) Collectors’ items.
D) Limited edition art objects.
I said C
4 Price competition enlarges ______, while product competition enlarges ________.
A) Consumer surplus; economic surplus
B) Economic profit; consumer surplus
C) Consumer surplus; economic profit
D) Both A and C
I said D
5. Sony digital cameras use Sony’s own proprietary flash memory cards while other digital cameras use third party common-standard flash memory cards.
A) Sony hopes to increase its revenue by selling complementary goods.
B) Sony wants to lock in its customers when they are buying new cameras.
C) Sony wants to earn monopoly profit on its proprietary flash cards.
D) All of the above.
I said D
6. Patented or copyrighted products enjoy a longer period of pricing power because
A) Competitors cannot legally offer patent-infringing products before the patent expires.
B) Competitors are not allowed to see the protected patents.
C) Competitors cannot charge a lower price for a legal copycat product.
D) None of the above.
I said A
7. Generic drugs are cheaper because
A) they are not as potent as the brand-name drugs.
B) generic-drug makers are non-profits.
C) their makers do not have to pay for the R D costs to develop the drugs.
D) generic drugs are subject to price control
I said C
8. An open standard benefits consumers because
A) open standard would encourage the entry of closed proprietary standards.
B) sellers using the open standard are forced to compete on prices.
C) the licensing fee for using the open standard is no higher than using the closed standard.
D) the switch cost between standardized products is high.
I said A
9. Bundling is a method to
A) sell only complementary products.
B) encourage more sales by providing an end-to-end solution to confused first-time buyers.
C) increase profit when price discrimination is also possible.
D) encourage more sales to buyers who already have one of the bundled items.
I said D
10. Network goods tend to grow explosively
A) After a critical mass is reached.
B) Right from the beginning.
C) Because they generate positive externality among themselves after a critical threshold.
D) All of the above.
E) Both A and C.
I said D