Essays on the effects of information technology on economic activity and business process coordination
Abstract
The three essays in this dissertation study issues related to technology-intensive product pricing, Information Technologies (IT) workforce utilization through an emerging online channel, and IT vendor selection in online markets, respectively. The first essay considers pricing issues of sequential versions of IT-intensive products. Pricing overlapping generations of an IT product line is a complicated task. The manufacturer of IT-intensive products must decide on prices and the extent of innovation in order to maximize profit by making both versions attractive to heterogeneous consumers. I propose an analytical model to examine the effect of product obsolescence and consumer time preferences on pricing decisions for IT-intensive products such as software and computer hardware. Optimal pricing strategies for overlapping generations are derived, and the nature of equilibrium solutions is examined. The presented analytical model can be also used to measure consumer time preference for a given product. Intel's pricing practice is analyzed, using Intel's microprocessor pricing data. The second essay proposes a strategic use of reverse online auctions, a typical e-lancing tool, to assign jobs to workers, for yield management from the IT service provider's perspective. Given the fixed capacity of a firm's IT workforce, the nature of IT projects, demand uncertainty, and growing competition among IT vendors, IT service firms cannot avoid occasionally holding some excess workforce. Markov decision process theory is employed to model an IT service firm which receives projects through two channels: a conventional procurement channel and an online auction spot market such as Elance Online (www.elance.com). The proposed model provides optimal online auction participation policies to maximize the expected total discounted profit. The third essay investigates IT vendor selection determinants in online markets. Given the potentially severe information asymmetries in online service markets, the work identifies credible signal devices for high quality vendors, which might serve as a driver for the continuous growth of this type of market. The empirical results suggest that clients rely on both average feedback rating and the cumulated quantity of the feedback ratings as credible signals of high quality vendor.
Degree
Ph.D.
Advisors
Altinkemer, Purdue University.
Subject Area
Management|Business costs
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