Leonard N. Stern School of Business, New York University
B20.3389 Doctoral Seminar (Rolling Readings) Fall 2001
Topics in the Economics of Technology

The course covers four topics in the economics of technology: technology in the economy, information goods, electronic markets and network products. Time permitting, we may also study information processing in organizations. Each of these is an active and current research area. This is not meant to be a comprehensive survey of research in the economics of IS. The focus is on depth rather than breadth.

There will be between 3 and 6 readings assigned per session; typically a mix of research papers and background readings. Each session will start with a summary of the research questions asked, the answers provided by the readings, and the questions still open (see summary guidelines below). This will be followed by an overview of the key theories and methods used. Subsequently, 2-3 students will lead the discussion of the research papers assigned to them (see discussion leader guidelines below).

Instructors: Arun Sundararajan, Ravi Mantena
Date and Time: Mondays, 3:00 - 5:50 p.m.
Place: K-MEC 9-172 (IS Conference Room)
Guidelines for deliverables in each class session: Since there has been some confusion regarding presentations and deliverables, here are some guidelines.
1. Synthesis and summary of papers
In each class session, all students are expected to have read all the papers distributed. Apart from the discussion leaders, all students must prepare a one-page summary of these papers. We will spend the first 20-30 minutes of the session discussing these summaries. When preparing your summary, keep the following things in mind:
  • Don't summarize each paper individually. You need to submit one summary for all the papers.
  • Skim the papers, and try to put them into a logical sequence first. A simple way to do this is to order them by year of publication, and in decreasing order of generality (tends to be reliable, though this is not always foolproof, since some ideas take longer to get published).
  • Read each paper well. While reading, document what you think are the primary questions and/or issues raised by the papers (together, not individually). Then pin down what aspect of these each of the individual papers addresses. Continue reading, and document which papers provide good answers, and what answers these papers provide. Try and look for overlapping answers between the papers that provide them. Isolate key answers that individual papers provide.
  • Think about and document what answers these papers (collectively) do not provide. Then think about and document what other important questions these papers raise. Some are raised explicitly in the 'future research' sections, while others may occur to you when you are reading the papers. Please do not list all 'future research' questions provided in the papers -- choose the ones that actually appeal to you. Think hard about this -- identifying important unanswered questions is a crucial and important skill -- and is best learnt by experimenting -- we will not penalize you at all for missing questions explicitly raised by the authors, and you will get substantial credit for raising good questions that haven't been mentioned by the authors.
  • Your document is probably too long by now. Try and shorten it. Try to make it read cohesively, like a 'research summary and agenda' for the topic.

    2. Being a discussion leader for a paper
    Each session, two students will lead the in-depth discussion of individual papers (occasionally, it may be a pair of papers assigned to each student, or more than two students). As the discussion leader, you should have some sort of structured presentation (either in the form of powerpoint slides or a word-processed handout) which others in the class could use to focus on during the discussion. While preparing the presentation, bear in mind that we'll spend about 30-40 minutes on each of these papers.
    Approach the presentation from the point of view of the authors. Think more about what is good about the paper, rather than what isn't. Aim to address the following aspects:
  • What are the main question(s) or issues addressed? Why are these interesting? Where do they fit, in terms of the larger picture (of research) in the area?
  • What is the methodology used? Think about the appropriateness of the methodology (not necessarily from a technical point of view) used, the level of analysis, whether the hypotheses (if any) formulated do a good job of trying to answer the basic questions, whether any alternative methodology would be suitable to answer the same question(s) and if so what data or other requirements you might have to use that methodology. If you are leading the discussion of an overview paper, or one that does not actually have formal research in it, this aspect is not well-defined -- so you should find out and mention (briefly) what methods were used in related papers mentioned, or the possible methods that could be used to validate some of the authors' discussion.
  • What are the main conclusions and take-aways? If possible, critique them (positive and negative) in terms of how precisely and convincingly they answer the main questions addressed.
  • What new/unanswered questions does the paper leave one with (where if anywhere, could we go from here, and will the journey be feasible and useful?).
    Sometimes, thinking about the issues, theories and methods that relate to the paper is helpful. While preparing the discussion guide you should constantly remember that your role as a discussion leader charges you with the primary responsibility of generating discussion (on the paper) during the class session. In the future, if one were to go back and read the paper again, your handout should serve as a sort of 'companion guide', which guides the reader through what the paper was about, and reminds then why it was convincing, interesting and important.

  • Schedule of Topics (evolving list -- please check frequently)
    Date Topic, Readings and Other Details
    September 10th
    Introduction: Reference Disciplines, Diversity and Cumulative Tradition
    • Benbasat, Isak and Weber, Ron, 1996. Rethinking "Diversity" in Information Systems Research. Information Systems Research 7 (4), 389-399.
    • Keen, Peter, 1980. MIS Research: Reference Disciplines and a Cumulative Tradition. Proceedings of the First ICIS, 9-18.
    • Robey Daniel, 1996. Diversity in Information Systems Research: Threat, Promise and Responsibility. Information Systems Research 7 (4), 400-408.
    • Varian, Hal, 1997. How to Build an Economic Model in Your Spare Time. in Passion and Craft: Economists at Work, University of Michigan Press.
    • Kriebel, Charles and Moore, Jeffrey, 1980. Economics and Management Information Systems. Proceedings of the First ICIS, 19-31.
    • Bakos, Yannis and Kemerer, Chris, 1992. Recent applications of economic theory in Information Technology research. Decision Support Systems 8, 365-386.
    • Kaufmann, Robert and Walden, Eric, 2001. Economics and Electronic Commerce: Survey and Research Directions.
    September 17th

    Discussion leaders:
    Katya, Shawndra, Sameer
    Technology in the Economy 1: Evolution
    • Bresnahan, Timothy and Greenstein, Shane, 1999. Technological Competition and the Structure of the Computer Industry. Journal of Industrial Economics XLVII (1), 1-40.
    • Chandler, Alfred and Cortada, James, 2000. The Information Age: Continuities and Differences, in Chandler and Cortada (ed.), A Nation Transformed by Information, Oxford University Press, 281-299.
    • Lipsey, Richard, Bekar, Cliff and Carlaw, Kenneth, 1998. What Requires Explanation, in Helpman (ed.), General Purpose Technologies and Economic Growth, Oxford University Press, 15-54.
    • Steinmueller, Edward, 1995. The U.S. Software Industry: An Analysis and Interpretive History, in Mowery (ed.), The International Computer Software Industry, Oxford University Press.
    • David, Paul, 2000. Understanding Digital Technology's Evolution and the Path of Measured Productivity Growth: Present and Future in the Mirror of the Past, in Kahin and Brynjolfsson (ed.), Understanding the Digital Economy, MIT Press, 49-97.
    September 24th

    Discussion leaders:
    Miguel, Zhong
    Technology in the Economy 2: Productivity
    • Brynjolfsson, Erik, 1993. The Productivity Paradox of Information Technology. Communications of the ACM 36 (12), 67-77.
    • Brynjolfsson, Erik, and Hitt, Lorin, 1996. Paradox Lost? Firm-Level Evidence on the Returns to IT Spending. Management Science 42 (4).
    • Brynjolfsson, Erik, and Hitt, Lorin, 2000. Beyond Computation: Information Technology, Organizational Change and Business Performance. Journal of Economic Perspectives 14 (4).
    • Brynjolfsson, Erik, Hitt, Lorin and Yang, Shinkyu, 2000. Intangible Assets: How the Interaction of Information Technology and Organizational Structure Affects Stock Market Valuations. Working Paper, New York University
    • David, Paul, 2000. Understanding Digital Technology's Evolution and the Path of Measured Productivity Growth: Present and Future in the Mirror of the Past, in Kahin and Brynjolfsson (ed.), Understanding the Digital Economy, MIT Press, 49-97.
    • Dewan, Sanjeev and Min, Chung-Ki, 1997. The Substitution of IT for Other Factors of Production. Management Science 43 (12), 1660-1675.
    October 1st

    Discussion leaders:
    Evangelos, Shawndra
    Electronic Markets 1: Foundations
    • Roberts, J., 1989. Perfectly and Imperfectly Competitive Markets. in Allocation, Information and Markets (The New Palgrave), 231-240. focus on 231-235 for this session.
    • Novshek, W. and Sonnenschein, H., 1987. General Equilibrium with Free Entry: A Synthetic Approach to the Theory of Perfect Competition. Journal of Economic Literature XXV, 1281-1306.
    • Spulber, D., 1996. Market Microstructure and Intermediation. Journal of Economic Perspectives 10(3), 135-152.
    • Bakos, Y., 1998. The Emerging Role of Electronic Marketplaces on the Internet. Communications of the ACM 41 (8), 35-42.
    • Kambil, A., 1997. Doing Business in the Wired World. IEEE Computer, 56-61 focus on 56-59 for this session.
    October 8th

    Discussion leader:
    Information Goods 1: Monopoly Pricing
    • Shapiro, C. and Varian, H., 1998. Information Rules (Chapter 2 and 3). (Background reading)
    • Tirole, J., 1989. The Theory of Industrial Organization, Chapter 3.
    • Bakos, Y. and Brynjolfsson, E. Bundling Information Goods: Pricing, Profits and Efficiency. Management Science 45(12), aaa-bbb
    October 15th

    Discussion leaders:
    Katya, Miguel, Zhong
    Information Goods 2: Copying
    • Liebowitz, S., 1985. Copying and Indirect Appropriability: Photocopying of Journals. The Journal of Political Economy, 93 (5), 945-957. (Background reading)
    • Jonhnson, W., 1985. The Economics of Copying. The Journal of Political Economy 93 (1), 158-174. (Background reading)
    • Conner, K. and Rummelt, R., 1991. Software Piracy: An Analysis of Protection Strategies. Management Science 37 (2), 125-139.
    • Bakos, Y., Brynjolfsson, E., and Lichtenberg, S., 1999. Shared Information Goods. Journal of Law and Economics
    • Varian, H., 2000. Buying, Selling and Renting Information Goods. Journal of Industrial Economics XLVIII (4), 473-488.
    October 22nd

    Discussion leaders:
    Evangelos, Samir, Shawndra
    Information Goods 3: Bundling and Competition
    • Tirole, J., 1989. The Theory of Industrial Organization, Chapter 5. (Background reading)
    • Bakos, Y. and Brynjolfsson, E., 2000. Bundling and Competition on the Internet. Marketing Science
    • Fay, S., and Mackie-Mason, J, 1999. Competition Between Firms that Bundle Information Goods. Working Paper, University of Michigan.
    • Kephart, J. and Fay, S., 2000. Competitive Bundling of Categorized Information Goods. Proceedings of the First ACM Conference on Electronic Commerce.
    October 29th

    Discussion leaders:
    Katya, (Ravi)
    Information Goods 4: Imperfect Competition
    • Tirole, J., 1989. The Theory of Industrial Organization, Chapter 7. (Background reading)
    • Bhargava, H. and Choudhary, V., 1999. Price Discrimination and Product Differentiation in Information Goods. Working Paper 1999-34, GSIA, Carnegie-Mellon University
    • Parker, P., and Sarvary, M., 1997. Marketing Information: A Competitive Analysis. Marketing Science 16 (1), 24-38.
    November 12th
    Wrap-up of unfinished topics, overview of search
    November 19th

    Discussion leaders:
    Evangelos, Samir, Ramesh
    Electronic Markets 2: Search and Intermediation
    • Diamond, P. Search Theory. in Allocation, Information and Markets (The New Palgrave). (focus on the first six or so pages)
    • Spulber, D., 1996. Market Making by Price-Setting Firms Review of Economic Studies 63, 559-580
    • Bakos, Y., 1997. Reducing Buyer Search Costs: Implications for Electronic Marketplaces. Management Science 43 (12), 1660-1675.
    • Lal, R., and Sarvary, M., 1999. When and How is the Internet Likely to Decrease Price Competition. Marketing Science 18 (4), 485-503.
    November 26th

    Discussion leaders:
    All students
    Electronic Markets 3: Empirical Studies
    • Ba, S. and Pavlou, P., 2001. Evidence of the effect of trust building technology in electronic markets: price premiums and buyer behavior. MIS Quarterly, (forthcoming) pdf
    • Brynjolfsson, E., and Smith, M.,2000. The Great Equalizer? Consumer Choice at Internet Shopbots. Working Paper, MIT Sloan School of Management. pdf
    • Chen, P. and Hitt, L., 2001. Measuring the Determinants of Switching Costs: A Study of the On-Line Brokerage Industry. Working Paper, University of Pennsylvania. pdf
    • Clay, K., Krishnan, R. and Wolff, E., 2001. Prices and Price Dispersion on the Web: Evidence from the Online Book Industry. NBER Working Paper W8271. pdf
    • Clemons, E., Hahn, I. and Hitt, L., 2001. Price Dispersion and Differentiation in On-Line Travel: An Empirical Investigation. Management Science, forthcoming. pdf
    • Pinker, E., Seidmann, A. and Vakrat, Y., 2000. Using Transaction Data for the Design of Sequential, Multi-unit, Online Auctions. Working Paper CIS 00-03, University of Rochester. pdf
    December 3rd

    Discussion leaders:
    (Bing), Ramesh, Samir, Zhong
    Network Products 1: Network Externalities and Positive Feedback
    • Brian Arthur's papers
    • Varian, H. and Shapiro, C., 1998. Information Rules. Chapter 7 (background).
    • Farrell, J. and Saloner, G., 1985. Standardization, Compatibility and Innovation. Rand Journal of Economics 16, 70-83.
    • Katz, M. and Shapiro, C., 1985. Network Externalities, Competition and Compatibility. American Economic Review 75, 424-440.
    • Katz, M. and Shapiro, C., 1986. Technology Adoption in the Presence of Network Externalities. Journal of Political Economy 94 (4), 822-841.
    December 10th
    Network Products 2: Systems Competition and Standards
    • Varian, H. and Shapiro, C., 1998. Information Rules. Chapter 8, 9 (background).
    • Besen, S. and Farrell, J., 1994. Choosing How to Compete: Strategies and Tactics in Standardization. Journal of Economic Perspectives 8(2), 117-131.
    • Farrell, J., and Katz, M., 2000. Innovation, Rent-Extraction and Integration in Systems Markets. Journal of Industrial Economics XLVIII, 413-432.
    • Katz, M. and Shapiro, C., 1994. Systems Competition and Network Effects. Journal of Economic Perspectives 8(2), 93-115.
    Network Products 3: Applications