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Spring 2010

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How can information transparency be leveraged in e-commerce?

THE QUESTION:

In a recently accepted article by Information Systems Research, Alok Gupta, Curtis L. Carlson School-wide Chair in Information Management, joins co-authors in exploring price elasticity and the existence of turbulence in online pricing in “Information Transparency in Business-to-Consumer Markets: Concepts, Framework, and Research Agenda.”

THE FINDINGS:

According to their research, when faced with emerging internet-based price comparison tools, sellers are increasingly designing innovative market mechanisms that reveal or conceal market information to compete on information rather than just price. As an example of the strategic trade-off between attracting consumers with market information and the risk of losing information advantages to competitors, Gupta and his co-authors looked at the turbulence in online pricing in the airline industry. The airline industry has gone through substantial market structure formation due to the information revolution triggered by the internet. Because of this, they have had to view the transparency of products and prices strategically, and have done so through the creation and revamping of the discount travel website Hotwire as first a mechanism that concealed information about the travel itinerary and carrier up front, and then introduced three levels of fares with different degrees of transparencies regarding product information.

        This example demonstrates two impacts of e-commerce technologies, namely, the increased overall ability of firms to disclose market information to consumers (transparency potential) and the increase in firms’ choices to conceal and distort product and price information. The paper finds that due to information technology, these changes in the availability of market information are likely to influence consumer behavior, firm strategy, and market structure. The paper synthesizes the conditions under which information can be monetized and identifies research opportunities in the design of markets based on information transparency.

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