| Abstract: | Responding to IT system failure often requires a collaborative approach in which both the client and the vendor need to invest in response capacity. In such a setting, the client needs to balance two opposing forces. By investing more resources, the client makes the vendor’s resources more effective in the system restoration stage. Yet, by providing more resources, the client encourages free-riding by the vendor. To better understand how a client should balance these forces, we develop a model that combines the key characteristics of value co-creation with standard maintenance contractual practices. Our analysis reveals the dual role of the client’s resources: they are not only a mechanism to provide support to the vendor; they also act as a risk transfer mechanism, and particularly so when those resources can be committed upfront. Based on our analytical model we have three core findings. Firstly, we show the value of commitment to the client diminishes the more risk-averse the vendor is. Secondly, we show that the value of commitment to the client increases as the client becomes more risk averse. Thirdly, as vendor risk aversion increases, we show that system downtime decreases when the client can commit upfront, whereas it increases when the client cannot. Currently we are working on testing these results in an experimental setting. We hope to determine how behavioral effects may either increase or offset inefficiencies in collaboration caused by differences in risk aversion or lack of commitment. |
| Date: | 11 April 2016 |
| Time: | 11:00am - 12:00noon |
| Speaker: | Mr Marc Jansen |
| Venue: | Room 14-222, 14/F, Academic 3 |
[ Back ]
