Determining prices is a key management task for a merchant. IT-enabled electronic markets facilitate price discovery by both buyers and sellers compared to traditional, physical markets. Recent research on electronic markets has revealed that IT has increased market transparency due to increased accessibility and availability of market information. However, what online sellers do in terms of strategic pricing decisions, in particular price adjustment behavior over time, has not been fully investigated. Due to the ease of making price changes, electronic sellers can execute a number of different pricing strategies, including setting the frequency and amount of price changes. We investigate the "opaque" side of electronic markets by exploring online sellers' price adjustment patterns over time. More specifically, we identify four questions related to pricing decisions, which lead to hypotheses about how managers determine prices in electronic markets. The paper tests the hypotheses with data from the online computer commodity market. We found, through a simulation analysis, that this market exhibits synchronized price changes, not random changes that are frequently found in traditional markets. Interestingly, small price increases occur more frequently than decreases, while the frequency of price adjustment is significantly associated with a product's price dispersion. A ranking analysis suggests that online sellers change their price strategies frequently, which makes it difficult for consumers to respond appropriately. The paper discusses the implications of our findings for management and for future research on market transparency and strategic pricing in electronic markets.
This paper analyzes the impact of e-commerce on markets where established firms face competition from Internet-based entrants with focused offerings. In particular, we study the retail brokerage sector where the growth of online brokerages and the availability of alternate sources of information and research services have challenged the dominance of traditional brokerages. We develop a stylized game-theoretic model to analyze the impact of competition between an incumbent full-service brokerage firm with a bundled offering of research services and trade execution and an online entrant offering just trade execution. We find that as consumers' willingness to pay for research declines, the incumbent finds it optimal to unbundle its offering when competing with the online entrant. We also find that the online entrant chooses a lower quality of trade execution when faced with direct competition from the incumbent's unbundled offering. The analytical model motivates a unique field experiment placing actual simultaneous trades with traditional full-service and online brokers, to compare order handling practices and the quality of trade execution. In keeping with our analytical results, our empirical findings show a significant difference in the quality of execution between online brokerages and their full-service counterparts. We discuss the relevance of our findings for quality differentiation, price convergence, and profit decline in a variety of markets where traditional incumbents are faced with changes in the competitive landscape as a result of e-commerce.
This paper presents an alternative view of the Information Systems identity crisis described recently by Benbasat and Zmud (2003). We agree with many of their observations, but we are concerned with their prescription for IS research. We critique their discussion of errors of inclusion and exclusion in IS research and highlight the potential misinterpretations that are possible from a literal reading of their comments. Our conclusion is that following Benbasat and Zmud's nomological net will result in a micro focus for IS research. The results of such a focus are potentially dangerous for the field. They could result in the elimination of IS from many academic programs. We present an alternative set of heuristics that can be used to assess what lies within the domain of IS scholarship. We argue that the IS community has a powerful story to tell about the transformational impact of information technology. We believe that a significant portion of our research should be macro studies of the impact of IT. It is important for academic colleagues, deans, and managers to understand the transformational power of the technology. As IS researchers with deep knowledge of the underlying artifact, we are best positioned to do such research.
This paper reports on an effort to integrate symbolic and mathematical models to tailor the output of a mathematical model to the particular domain of a decision maker. AESOP combines the Black-Scholes model of stock options pricing with an expert system; the integrated model is designed for use by an options specialist on the American Stock Exchange. The specialist makes a number of adjustments to the output of the mathematical model; the purpose of the symbolic mode! is to make as many of these modifications as possible automatically. The paper reports on the development and structure of AESOP and presents data on its use.
This article presents a model of the implementation process for dedicated packages and describes a research project to test the model undertaken with the cooperation of a major computer vendor. Data were collected from 78 individuals in 18 firms using the package and from the package vendor. The results of the study offer some support for the model, along with suggestions for package implementation for both the customer and package vendor. The purpose of this article is to describe a study of the implementation process for a packaged system, called Production System (PS). A major computer vendor designed and programmed PS and offers it to its customers. PS consists of multiple, integrated modules, with each module dedicated to a different aspect of the manufacturing process. Customers can order all or parts of the package for installation on the vendor's computers.