Management > Business Administration > Research Seminar in IT and Organizations: Economic

Research Seminar in IT and Organizations: Economic posted by duggu on 12/10/2007

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Courseware/Lectures

Test/Tutorials

Course Highlights

This course features extensive readings and related assignments. Students play an essential role in presenting content to the class based on these materials.

Course Description

Business organizations and markets use a bewildering variety of structures to coordinate the productive activities of their stakeholders. Dramatic changes in information technology and the nature of economic competition are forcing firms to come up with new ways of organizing work. This course uses economic theory to investigate the roles of information and technology in the existing diversity of organizations and markets and in enabling the creating of new organizational forms.

*Some translations represent previous versions of courses.

Syllabus

Readings

Course Packet

Shapiro, C., and Varian, H., Information Rules: A Strategic Guide to the Network Economy. Cambridge: Harvard Business School Press, November 1, 1998. ISBN: 087584863X.

Brynjolfsson, E. and B. Kahin. Understanding the Digital Economy: Data, Tools, and Research. Cambridge: MIT Press, October 16, 2000. ISBN: 0262024748.

Supplemental handouts will be distributed in class.

Requirements

Weekly readings and class discussion
Each participant will serve as a facilitator for (at least) one class session
Term Paper (suitable for conference submission when complete)
Short papers: Five 2-page short papers, as noted in the calendar

Grading

Grades will be assigned on the following basis:

Activities	percentages
Class participation and leadership	30%
Two-page papers on readings (5)	20%
One survey or research paper	50%

Course Objectives and Description

The class is designed for Ph.D students in management, information technology, organizational behavior, industrial relations, economics, and related disciplines. For non-economists, this class offers an exposure to fundamental ideas in the economics of information, organizations, and markets. For economists, this class offers the opportunity to apply abstract economic ideas to the question of how the rise of information technology and related changes in the business environment affect organizations and markets. The applied nature of the class may also be appealing to MBA students willing to undertake the extensive reading assignments and class preparation required in a seminar class of this type.

A seminar class works because students come prepared to engage in thoughtful discussions of the material. Students are therefore asked to write informal, two page memos prior to most classes. These memos will generally be responses to some questions or issues we pose prior to each class. Our purpose in assigning these memos is to help students reflect on important aspects raised in the assigned readings. In addition, each student will be asked to lead part of the class discussion. This will typically involve meeting with the instructor ahead of time to discuss objectives and discussion plans.

There are no exams in this class but a final paper is due at the end of the semester. It can be either a survey of the research in a particular area or a research paper on a specific topic. Either way, the paper can be thought of as a step towards developing a research program. In the past, some of these papers have led to publications. Further details of the paper will be provided in class.

Calendar

LEC #	TOPICS	KEY DATES
1	Introduction: Versioning and Price Discrimination
2	Pricing Information	Two-page analysis due
3	Search and Competition I
4	Search and Competition II	Two-page analysis due
5	Reputation, Trust and Recommender Systems
6	Economics of Networks, Standards and Lock-In	Two-page analysis due Paper proposal due 1 week after lecture 6
7	IT and Productivity	Two-page analysis due
8	The Principal-Agent Model of the Firm
9	Managerial Views of the Firm	Two-page analysis due
10	Incomplete Contracts and Firm Boundaries	Draft paper due
11	Student Presentations	ICIS submission deadline 3 days after lecture 11
12	Student Presentations (cont.)
13	The Future of the Information Economy	Final paper due

Further Reading:

Lec #	TOPICS	READINGS
1	Introduction: Versioning and Price Discrimination (PDF)	Recommended Readings Varian, H. "How to Build an Economic Model in your Spare Time." In Passion and Craft: Economists at Work. Edited by Michael Szenberg. Ann Arbor, MI: University of Michigan Press, 1999. ISBN: 0472066854. Armstrong, S. "Management Science." Marketing Bulletin 9 (1998): 1-15. Davis, M. "That's Interesting! Towards a Phenomenology of Sociology and a Sociology of Phenomenology." Philosophy of Social Science 1 (1971): 309-344. Varian, H. Federal Reserve Remarks; Brynjolfsson Comment on Varian. Jackson Hole Conference, 2001. Varian, H. "A Model of Sales." American Economic Review 70, no. 4 (1980): 651-659. Varian, H. "Errata: A Model of Sales." American Economic Review 71, no. 3 (1981): 517. Shapiro, C., and H. Varian. "Pricing Information." In Information Rules: A Strategic Guide to the Network Economy. Cambridge, MA: Harvard Business School Press, 1998, Chapter 2. ISBN: 087584863X. Shapiro, C., and H. Varian. "Versioning Information." In Information Rules: A Strategic Guide to the Network Economy. Cambridge, MA: Harvard Business School Press, 1998, Chapter 3. ISBN: 087584863X. Tirole, J. "Price Discrimination." In The Theory of Industrial Organization. Cambridge, MA: MIT Press, 1989, pp. 133-148, 150-152. ISBN: 0262200716.
2	Pricing Information (PDF)	Required Readings Lyman, P., and H. Varian, "How Much Information - Executive Summary," 2003. Liebowitz, S. "Copying and Indirect Appropriability: Photocopying of Journals." Journal of Political Economy 93, no. 5 (1985): 945-957. Varian, H. "Buying, Sharing and Renting Information Goods." The Journal of Industrial Economics XLVIII, no. 4 (December 2000): 473-488. Bakos, Y., and E. Brynjolfsson. "Bundling Information Goods." Management Science 45, no. 12 (1999): 1613-1630. Bakos, Y. and E. Brynjolfsson. "Bundling and Competition on the Internet." Marketing Science 19, no. 1 (Winter 2000): 63-82. Nalebuff, B. R. "Bundling & Barriers to Entry." Yale Economics, Working Paper, 2003. Parker, G., and M. van Alstyne. "Information Complements, Substitutes, and Strategic Product Design," Working Paper, 2000. Recommended Readings Bakos, Y., and E. Brynjolfsson. "Aggregating and Disaggregating Information Goods." In Proceedings of Internet Publishing and Beyond: The Economics of Digital Information and Intellectual Property, 1999. Spence, A., and B. Owen. "Television Programming, Monopolistic Competition and Welfare." Quarterly Journal of Economics 91, no. 1 (1977): 103-26. Conner, K., and R. Rumelt. "Software Piracy: An Analysis of Protection Strategies." Management Science 37, no. 2 (February 1991): 125-139. Hitt, L. M., and P. Chen. "Bundling with Customer Self-Selection: A Simple Approach to Bundling Low Marginal Cost Goods." GSIA Working Paper #2003-E33. Sundararajan, A. "Non-linear Pricing of Information Goods." Working Paper, NYU Stern School of Business, December 2002.
3	Search and Competition I	Required Readings Stiglitz, J. "Imperfect Information in the Product Market." In Handbook of Industrial Organization. Vol. 1. Edited by Schmalensee, R., and R. Willig. Amsterdam, North Holland: Elsevier Science, 1989, pp. 769-844. (Read especially pp. 771-823). Note: This is a long reading, and heavy going, but definitely worth it. It captures the essence of literally dozens of seminal articles, many by the Nobel Prize-winning author. Diamond, P. "Search Theory." In The New Palgrave: Allocation, Information, and Markets. Edited by J. Eatwell, M. Milgate, and P. Newman. Basingstoke, UK: MacMillan Press, 1989. ISBN: 0333495381. Bakos, Y. "Reducing Buyer Search Costs: Implications for Electronic Marketplaces." Management Science 43, no. 12 (December 1997): 1676-1692. Salop, S., and J. Stiglitz. "Bargains and Ripoffs: A Model of Monopolistically Competitive Price Dispersion." Review of Economic Studies 44, no. 3 (October 1977): 493-510. Brynjolfsson, E., and M. Smith. "Frictionless Commerce? A Comparison of Internet and Conventional Retailers." Management Science 46, no. 4 (April 2000): 563-585. Recommended Readings Stigler, G. "The Economics of Information." The Journal of Political Economy 69, no. 3 (June 1961): 213-225. Pepall, L., G. Norman, and D. Richards. "Miss Daisy and Her Antique Cars." In Industrial Organization: Contemporary Theory and Practice. St. Paul, MN: South-Western Publishing Company, 1999, Chapter 3.1-3.2. ISBN: 0538859482. Pepall, L., G. Norman, and D. Richards. "Product Variety and Price Discrimination." In Industrial Organization: Contemporary Theory and Practice. St. Paul, MN: South-Western Publishing Company, 1999, Chapter 4.1-4.2. ISBN: 0538859482. Pepall, L., G. Norman, and D. Richards. "Price Competition." In Industrial Organization: Contemporary Theory and Practice.St. Paul, MN: South-Western Publishing Company, 1999, Chapter 5.4. ISBN: 0538859482.
4	Search and Competition II	Required Readings Lynch, J., and D. Ariely. "Wine Online: Search Costs and Competition on Price, Quality, and Distribution." Marketing Science 19, no. 1 (Winter 2000): 83-103. Goolsbee, A. "Competition in the Computer Industry: Online vs. Retail." Journal of Industrial Economics 49, no. 4 (2001): 487-499. Smith, M., J. Bailey, and E. Brynjolfsson. "Understanding Digital Markets: Review and Assessment." In Understanding the Digital Economy. Edited by E. Brynjolfsson and B. Kahin. Cambridge, MA: MIT Press, 2000, pp. 99-136. ISBN: 0262024748. Brynjolfsson, E., and M. Smith. "The Great Equalizer? Consumer Choice Behavior at Internet Shopbots." Working Paper, MIT Sloan School of Management, July 2000. Baye, M., and J. Morgan. "Information Gatekeepers on the Internet and the Competitiveness of Homogeneous Product Markets." American Economic Review 91, no. 3 (June 2001): 454-474. Stanford GSB EC-8. "Pricing and Branding on the Internet."
5	Reputation, Trust and Recommender Systems ( PDF)	Required Readings Resnick, P., and R. Zeckhauser. "Trust Among Strangers in Internet Transactions: Empirical Analysis of eBay's Reputation System. The Economics of the Internet and E-Commerce." In Advances in Applied Microeconomics. Vol. 11. Edited by Michael R. Baye. Amsterdam, North Holland: Elsevier Science, 2002. Resnick, P., and R. Zeckhauser. "Recommender Systems." Communications of the ACM 40, no. 3 (March 1997): 56-58. Dellarocas, C. "The Impact of Online Opinion Forums on Competition and Marketing Strategies." MIT Sloan Working Paper, 2004. Dellarocas, C. “The Digitization of Word of Mouth: Promise and Challenges of Online Feedback Mechanisms.” Management Science 49, no. 10 (2003): 1407-1424. Recommended Readings Miller, N., P. Resnick, and R. Zeckhauser. "Eliciting Honest Feedback in Electronic Markets." Working Paper, Kennedy School of Government, Research Paper Series, August 2002. Lucking-Reiley, D. "Auctions on the Internet: What's being Auctioned and How?" Journal of Industrial Economics 48, no. 3 (200): 227-252. Dellarocas, C. "Efficiency and Robustness of Binary Feedback Mechanisms in Trading Environments with Moral Hazard." MIT Sloan Working Paper 4297-03, April 2003.
6	Economics of Networks, Standards and Lock-In ( PDF)	Required Readings Farrell, J., and P. Klemperer. "Coordination and Lock-In: Competition with Switching Costs and Network Effects." Draft Prepared forThe Handbook of IO. December 2001. Katz, M. and C. Shapiro. "Networks Externalities, Competition and Compatibility." American Economic Review 75, no. 3 (June 1985): 424-440. Liebowitz, S. J., and S. Margolis. "Network Externality: An Uncommon Tragedy." Journal of Economic Perspectives 8, no. 2 (Spring 1994): 133-150. Brynjolfsson, E. and C. Kemerer. "Network Externalities in Microcomputer Software: An Econometric Analysis of the Spreadsheet Market." Management Science 42, no. 12 (December 1996): 1627-1647. Varian, H. "Why Is That Dollar Bill in Your Pocket Worth Anything?" New York Times 15 January 2004. Recommended Readings Klemperer, P. "Markets with Consumer Switching." Quarterly Journal of Economics 102, no. 2 (May 1987): 375-394. Economides, N. "The Economics of Networks." International Journal of Industrial Organization 14, no. 2 (March 1996). Arthur, W. B. "Competing Technologies, Increasing Returns, and Lock-In by Historical Events." The Economic Journal 99, no. 394 (March 1989): 116-131. Arthur, W. B. "Positive Feedbacks in the Economy." Scientific American 262 (February 1990): 92-99. Riggins, F. J., Kriebel, C. H., and Mukhopadhyay, T. "The Growth of Interorganizational Systems in the Presence of Network Externalities." Management Science 40, no. 8 (August 1994) 984-998. Shapiro, C., and H. Varian. "Networks and Positive Feedback." In Information Rules: A Strategic Guide to the Network Economy. Cambridge, MA: Harvard Business School Press, 1998, Chapter 7. ISBN: 087584863X.
7	IT and Productivity ( PDF)	Required Readings Jorgenson, D. "Information Technology and the U.S. Economy." Presidential Address to the American Economic Association, December 2000. Stiroh, K. "Reassessing the Impact of IT in the Production Function: A Meta-Analysis." Federal Reserve Bank of New York, 2002. Gordon, R. "Does the 'New Economy' Measure up to the Great Inventions of the Past?" Journal of Economic Perspectives 14, no. 4 (2000): 49-74. Brynjolfsson, E., L. Hitt, and S. Yang. "Intangible Assets: Computers and Organizational Capital." Brookings Papers on Economic Activity 1 (2002): 137-181. Recommended Readings Autor, D., F. Levy, and R. Murnane. "The Skill Content of the Technology Change." Quarterly Journal of Economics 118, no. 4 (2003): 1279-1333. Brynjolfsson, E., and L. Hitt. "Beyond Computation: IT, Organizational Transformation and Business Performance." Journal of Economic Perspectives 14, no. 4 (1995): 23-48. Brynjolfsson, E., L. Hitt, and S. Yang. "Intangible Assets: How the Interaction of Computers and Organizational Structure Affects Stock Market Valuations." Proceedings of the 1998 International Conference on Information Systems: 8-29. Bresnahan, T., E. Brynjolfsson and L. Hitt. "Information, Technology, Workplace Organization and the Demand for Skilled Labor: Firm-Level Evidence." Quarterly Journal of Economics 117, no. 1 (2002): 339-376. Stiroh, K. "Information Technology and U.S. Productivity Revival: What do the Industry Data Say?" American Economic Review 92, no. 5 (December 2002): 1559-1576.
8	The Principal-Agent Model of the Firm ( PDF)	Required Readings Milgrom, P., and J. Roberts. Economics, organization, and management. Englewood Cliffs, NJ: Prentice-Hall, 1992, Chapter 6, summary pages for Chapters 7,8. ISBN: 0132246503. van Zandt, T. "Decentralized Information Processing in the Theory of Organizations." In Contemporary Economic Development Reviewed, Volume 4: The Enterprise and its Environment. Edited by M. Sertel. London, UK: Macmillan Press, 1997,Chapter 7 (pp. 125-160). (This survey article provides a good overview of decentralized information processing views of the firm.) Jensen, M. and W. Meckling. "Knowledge, Control and Organizational Structure." In Contract Economics. Edited by L. Werin and H. Hijkander. Cambridge, MA: Basil Blackwell Publishing, 1992, pp. 251-274. ISBN: 0631178937. Baker, G., and B. Jorgensen. "Volatility, Noise, and Incentives." Harvard University Working Paper, March 2003. (Skip the math and pay attention to the intuition and how different types of uncertainty are modeled.) Autor, D., F. Levy, and R. Murnane. "The Skill Content of the Technology Change." Quarterly Journal of Economics 118, no. 4 (2003): 1279-1333. Recommended Readings von Hayek, F.A. "The Use of Knowledge in Society." American Economic Review 35, no. 4 (September 1945): 519-530. A noble-prize winning classic. Williamson, O.E. "Hierarchical Control and Optimal Firm Size." Journal of Political Economy 85, no. 2 (April 1967): 123-138. Autor, D., L. Katz, and A.Krueger. "Computing Inequality: Have Computers Changed the Labor Market?" NBER Working Paper, March 1997.
9	Managerial Views of the Firm ( PDF)	Required Readings Milgrom, P. and J. Roberts. "The Economics of Modern Manufacturing: Technology, Strategy, and Organization." American Economic Review 80, no. 3 (June 1990): 511-528. Ichniowski, C., K. Shaw and G. Prennushi. "The Effects of Human Resource Management Practices on Productivity." American Economic Review 87, no. 3 (June 1997): 291-313. Drucker, P. "The Coming of the New Organization." Harvard Business Review, January-February 1988. ISBN: B00005RZ1V. Galbraith, J. R. "Organizational Design: An Information Processing View." Interfaces 4, no. 3 (1974): 28-36. Radner, R. "Bounded Rationality, Indeterminacy, and the Theory of the Firm." The Economic Journal 106, no. 438 (September 1996): 1360-1373. Recommended Readings Brynjolfsson, E., A. Renshaw, M. Van Alstyne. "The Matrix of Change." Sloan Management Review38, no. 2 (1997): 37-54. March, J. "Exploration and Exploitation in Organizational Learning." Organizational Science 2, no. 1 (1999): 71-87. Milgrom, P., and J. Roberts. Economics, organization, and management. Englewood Cliffs, NJ: Prentice-Hall, 1992, Chapter 5, especially p. 126-147. ISBN: 0132246503.
10	Incomplete Contracts and Firm Boundaries	Required Readings Milgrom, P., and J. Roberts. Economics, organization, and management. Englewood Cliffs, NJ: Prentice-Hall, 1992, Chapter 16. ISBN: 0132246503. Hart, O. “An Economist's Perspective on the Theory of the Firm.” Columbia Law Review 89, no. 7 (November 1989): 1757-1766. Brynjolfsson, E. "Information Assets, Technology, and Organization." Management Science 40, no. 12 (December 1994): 1645-1662. Kumar, K., R. Rajan, and L. Zingales "What determines firm size?" University of Chicago Working Paper, 2001. Recommended Readings Johnston, R. and P. Lawrence. "Beyond Vertical Integration - the Rise of the Value-Adding Partnership." Harvard Business Review, (July-August 1998): 94-101. Tapscott, D., D. Ticoll, and A. Lowy. Digital Capital. Cambridge, MA: Harvard Business School Press, 2000. ISBN: 1578511933. Green, E., and R. Porter. "Noncooperative Collusion under Imperfect Price Information." Econometrica 52, no. 1. (January 1984): 87-100. Gibbons, R. Game Theory for Applied Economists. Princeton, NJ: Princeton University Press, 1992, pp. 88-99, pp. 107-112. ISBN: 0691003955. Hart, O. Firms, Contracts, and Financial Structure. Oxford, UK: Clarendon Press, 1995, Chapter 1. ISBN: 198288816. Coase, R. H. "The Nature of the Firm." Economica 4, no. 16 (1937): 386-405.
11	Student Presentations
12	Student Presentations (cont.)
13	The Future of the Information Economy