Evaluation of strategic investments in information technology
Communications of the ACM
Justifying investments in new information technologies
Journal of Management Information Systems
An economic analysis of strategic information technology investments
MIS Quarterly - Special issue on the strategic use of information systems
Information technology innovation and competition in the presence of switching costs
ICIS '91 Proceedings of the twelfth international conference on Information systems
The productivity paradox of information technology
Communications of the ACM
Leveraging the new infrastructure: how market leaders capitalize on information technology
Leveraging the new infrastructure: how market leaders capitalize on information technology
Information technology impact on process output and quality
Management Science - Special issue: Frontier research on information systems and economics
Management Science
Be absolute for death: life after Moore's law
Communications of the ACM
Essentials of Management Information Systems
Essentials of Management Information Systems
Winners, Losers & Microsoft; Competition and Antitrust in High Technology
Winners, Losers & Microsoft; Competition and Antitrust in High Technology
A Case for Using Real Options Pricing Analysis to Evaluate Information Technology Project Investment
Information Systems Research
Sequential Product Positioning Under Differential Costs
Management Science
Market Information and Firm Performance
Management Science
Journal of Management Information Systems - Special issue: Impacts of information technology investment on organizational performance
A note on project risk and option values of investments in information technologies
Journal of Management Information Systems
Information Technology Investments and Firms' Performance--A Duopoly Perspective
Journal of Management Information Systems
Journal of Management Information Systems
A Framework for Assessing the Business Value of Information Technology Infrastructures
Journal of Management Information Systems
Journal of Management Information Systems
Journal of Management Information Systems
Managing Information Technology Investment Risk: A Real Options Perspective
Journal of Management Information Systems
Strategic IT Investments: The Impact of Switching Cost and Declining IT Cost
Management Science
Information Technology and Management
Managerial Entrenchment with Strategic Information Technology: A Dynamic Perspective
Journal of Management Information Systems
Determining Optimal CRM Implementation Strategies
Information Systems Research
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Investments in information technology (IT) have become crucial for firms to improve the quality of their products and services. Typically, IT cost for the same performance level declines over time. In a competitive market, a decline in IT cost over time provides a cost advantage to the later entrant, making the early entrant's investment decision problem challenging. In this paper, we study the problem of strategic IT investments in the declining cost scenario using a sequential duopoly model. Our results show that declining IT cost intensifies or relaxes competition between firms depending on whether they are serving quality- or price-sensitive markets. In both cases, the average price per unit quality decreases when the IT cost declines, which benefits consumers. We also show that if the first entrant is uncertain about the extent of its cost disadvantage, the first entrant overinvests (underinvests) in a price-sensitive (quality-sensitive) market as the degree of uncertainty increases.