Many information systems in the Internet age mediate interactions among individuals and organizations, aggregate preferences, and coordinate actions and resource allocation as a result. Such systems can be seen as software implementations of economic mechanisms. Examples include electronic auction markets, crowd sourcing platforms, matching markets, online labor markets, reputation mechanisms, e-voting systems, or recommender systems.
The design of such Internet-based systems and their outcomes requires an in-depth understanding of the underlying strategic problems a participant is facing and the various behavioral patterns of organizations and human subjects. Not surprisingly game theory, experimental, and behavioral economics have received increasing attention in the recent years as they provide valuable guidelines for information systems design.
For example, the economic theory of stable matching with preferences allows us to design systems for course allocation or school choice in which participants have dominant strategies to reveal their preferences truthfully. There are no incentives for strategic manipulation for one side of the participants and as a result one can typically expect fair and efficient outcomes. In a similar way, game-theory and experimental economics are central in the design of ad auctions, sharing platforms, reputation mechanisms, etc. Moreover, economic theory provides the basis for the design of policy measures to mitigate negative externalities that are created through Internet-based systems such as sharing platforms.
While microeconomic theory provides fundamental models about the equilibrium behavior of players in markets and other complex strategic environments, the design of Internet-based information systems poses many new challenges. For example, IS designers often face utility functions and design desiderata, which are quite different from the ones that are described in microeconomic textbooks. On the other hand, Internet-based information systems allow for the implementation and the analysis of completely new designs, which have not yet been described in the theoretical literature.
Much of the traditional literature in economic theory is focused on the development of formal models explaining economic interaction, less so on systems design. On the other hand, the traditional literature in the design sciences such as information systems, computer science, and operations research does often not consider incentives and the strategic interaction of individuals. In recent years there has been an increasing interaction between these different academic disciplines (e.g., algorithmic game theory).
A central theme in the IS literature has always been the interaction of information systems design and human behavior. Examples include the literature on the adoption of information systems in organizations, but also the research on recommender systems where algorithm design and behavioral models need to be considered together. Therefore, it is not surprising that an increasing number of scholars focuses economic principles of IS design. This line of research can be seen as an engineering arm of economics, and it is rooted in economic theory.
The workshop series was established to build up a European network of researchers interested in IS Design and Economic Behavior.