The Role of Information and Information Systems in the Online Retail Market

A new software infrastructure, sponsored by RGC Teaching Development Grant HKUST3 (Rami Zwick, PI), has been developed for teaching the role of information in retail markets and supply chains. Introductory information systems courses often include a hands-on component, but this is usually limited to the technology itself, detached from any business problem. This project aims to give students a hands-on appreciation of the role of information and information systems in the context of a retail business. Students alternately play the role of consumer or seller in an online market. Using methods from experimental economics, consumers are assigned values for various products; their basic goal is to find low-price sellers for the products they value highly. Sellers are similarly assigned a cost for each product, and their basic goal is to attract consumers and make a profit. Consumers and sellers face a variety of decisions. Consumers must decide how much ‘money’ to spend on search, as well as which products to buy and from which store. Sellers face two sets of decisions. The first set, which we will use in our ISMT class, focuses on supply and demand information. The decisions include: which products to sell, what prices to charge, how much to pay for targeted mailing lists that include high-value customers, and other decisions. The administrator can also manipulate the information structure of the market along two dimensions, how easy or costly it is for buyers to search, and whether sellers can see one another’s prices and sales figures. In summary, sellers face decisions about products, pricing, and advertising A second focus regards supply chains, and this focus would be more appropriate for courses in Operations Management or Management Science. With this focus, the administrator can set the delivery lag time when a seller orders a product, as well as inventory liquidation costs. In this setup, sellers face additional decisions about order quantities and inventory control. In this case, sellers experience the value of information for managing operations, in addition to its value in assessing supply and demand. The simulated market is not only open to students during a fixed lab time. Rather, a server is open continuously for five days, during which time the market is open and any transactions or browsing activity is allowed.