Essays in System Dynamics for Operations Management: Policy, Platforms and Pricing

Abstract

This dissertation explores how system dynamics (SD) can improve traditional operations management (OM) models for work in public policy, understanding plaform markets, and the implications of price transparency decisions on platform firm performance and consumer behavior.

Chapter 1, co-authored with Edward Anderson and David Keith, creates a roadmap for researchers who study public policy-related OM problems. We review and organize relevant system dynamics literature in both traditional operations management, and public policy venues. We identify a set of interesting open questions and the potential SD building blocks for answering them by topic. Leveraging this review, we describe under what conditions system dynamics is most appropriate. We then identify several overarching methodological and domain gaps for future research. Finally, we propose a process for using SD with traditional OM methodologies.

Chapter 2 is joint work with Geoffrey Parker and Edward Anderson. We develop the Value Creation Lens, a framework, grounded in theory, for understanding the dynamics of platform value creation and growth. We separate a platform’s value into three components: (1) the standalone value of the product, (2) the value of other participants on the platform, and (3) the value created by complementary products from 3rd party providers. We explore differences in value creation between consumer-facing and business-facing platforms, along with managerial implications.

Chapter 3 studies the effects of a common price obfuscation tactic, namely the use of shrouded hidden fees on consumer behavior and platform firm performance. I develop an SD model based on the Value Creation Lens and use it to understand the competing incentives that lead to price shrouding or transparency in online platforms. I find evidence to suggest that building consumer trust through disclosure is a dynamic attribute that may be dominated by worse-before-better outcomes. The results provide evidence that platform price transparency decisions should differ depending on market and industrial context.