ALINA M. CHIRCU is an Assistant Professor of Management Science and Information Systems in the McCombs School of Business at the University of Texas at Austin. She holds a Ph.D. in Management Information Systems, and master’s and bachelor’s degrees in Computer Science. Her research interests lie in the area of implementation, adoption, and value assessment of information technology applications in organizations, with special emphasis on e-business applications. Her recent projects have explored Internet- based corporate travel reservation systems, limits to value of IT investments, intermediation strategies in e- commerce, and factors influencing e-commerce adoption. She has published in the Journal of Management Information Systems, Communications of the ACM, International Journal of Electronic Commerce, and Electronic Markets, and has presented papers at the Workshop on Information Systems and Economics (WISE), the Hawaii International Conference on Systems Sciences (HICSS), the Americas Conference on Information Systems (AMCIS), the INFORMS Conference on Information Systems and Technology (CIST), and INFORMS meetings. ROBERT J. KAUFFMAN is Professor and Chairman of the Department of Information and Decision Sciences and Co-Director of the MIS Research Center at the Carlson School of Management, University of Minnesota. His degrees are from the University of Colorado, Boulder (B.A.), Cornell University (M.A.), and Carnegie Mellon University (M.S., Ph.D.). Dr. Kauffman has held faculty positions at New York University and the University of Rochester, visited the Research Department at the Philadelphia Federal Reserve Bank, and earlier worked in international banking on Wall Street. His current research interests center on senior management issues in information systems, organizational strategy and technology, electronic commerce, and information technology investments in various services industry contexts. His articles on these and other issues have appeared in leading academic journals, including MIS Quarterly, Organization Science, Communications of the ACM, IEEE Transactions on Software Engineering, International Journal of Electronic Commerce, Information Systems Research, and Decision Sciences, among others. His e-commerce research was recognized three times recently with best-of-conference awards (WITS 1999, AMCIS 2000, and ICIS 2000), and was nominated twice for best-of-conference (HICSS 2001 and HICSS 2002). He also recently received a reviewer-of-the-year award from the new journal, Information Systems Frontiers. His research on consumer-to-consumer electronic auctions was noted in articles in the Economist magazine and the New York Times in November 2001, and elsewhere. He also recently guest-edited special issues of the Journal of Management Information Systems, Communications of the ACM, Electronic Markets, and the Journal of Organizational Computing and Electronic Commerce, and serves on the editorial boards of a number of leading journals. THE PAPERS INCLUDED IN THIS SPECIAL SECTION of the Journal of Management Information Systems were initially reviewed for two mini-tracks at the 2002 Hawaii International Conference on Information Systems (HICSS): “Economics and Electronic Commerce” and “Information Technology and Competitive Strategy.” They continue to reflect the interest that information systems (IS) and marketing researchers have in blending the theoretical and methodological perspectives from economics to some of the leading strategy and information technology (IT)-related research problems of our time. However, the fundamentals of the marketplaces and the economy in which e-commerce firms now compete are dramatically different than those that researchers examined just two years ago. The down market for technology stocks, the reduced availability of venture capture funding for Internet-related start-ups and the new climate of investor caution following the accounting problems of firms such as Enron, WorldCom, and Global Crossing have slowed the pace of innovation for e-commerce business activities. Yet, even in this climate, more careful experimentation and further refinement of e-commerce business models continues. Once again, this year we invite JMIS readers to sample some of the research that we have shaped in the workshop-like atmosphere of our mini-tracks at the HICSS Conference, and through the subsequent journal review process. In the first paper, Eric Clemons of the University of Pennsylvania, Bin Gu of the University of Texas at Austin, and Karl Reiner Lang of the City University of New York explore issues related to information products using the theories of resource-based competitive advantage and newly vulnerable markets. In their paper, “Newly Vulnerable Markets in an Age of Pure Information Products: An Analysis of Online Music and Online News,” they discuss the music recording and newspaper industries, where the basis for competition has changed dramatically with the advent of the Internet. New Internet technologies have created the capability for music artists to become their own producers and distributors of their music recordings, leading to the potential for record label disintermediation. In addition, the demand for online person-to-person exchange of MP3 music has grown beyond most observers’ expectations, creating the impetus for other new technological innovations and lawsuits that are aimed at controlling third-party distribution and protecting copyright holders. The newspaper industry, in contrast, has had fewer problems with defending the value of its core products—news and information—in the marketplace. The strategic vulnerability of the firms in the newspaper industry has not materialized where observers thought that it would: with the information goods themselves. Instead, newspapers face the loss of a key source of advertising revenues, as the Internet creates pressure for the unbundling of news and advertising. The authors model and simulate the range of outcomes that are possible when self-promotion and defection from a record label are possible for artists, and when piracy and different defensive strategies are possible as well. The authors note the contrasts with the newspaper industry, whose information goods are rarely the product of “rock star” editors and writers, though such participants in the news business are indispensable because of their role as auditors and guarantors of the reliability of news products. In the second paper, “Pricing Strategies of Neutral B2B Intermediaries with Two-Sided Network Effects,” Byungjoon Yoo of Carnegie Mellon University, Vidyanand Choudhary of the University of California–Irvine, and Tridas Mukhopadhyay of Carnegie Mellon University propose a new way of analyzing electronic B2B intermediaries’ strategies based on the interdependence of positive and negative externalities that accrue for such middlemen. In their analytical model, buyers benefit from having more suppliers trading through the intermediary, whereas suppliers benefit from interacting with more buyers, but are hurt when more suppliers compete for the same buyers. The authors show how the optimal pricing of the intermediary’s services, as well as the number of parties using the intermediary, are intrinsically related to these network externalities, as well as to switching costs to the online B2B intermediary. The authors point out that this result holds true for buyers and suppliers alike. This interdependence leads to a number of interesting and rather counterintuitive results that illustrate the complexity of an electronic intermediary’s pricing decisions and may help shed some light on the unusual number of failed electronic marketplaces. A key managerial recommendation offered by the authors points out the need for B2B e-intermediaries to consider all these interacting effects in order to design viable and profitable marketplace structures. The next two papers investigate the decisions facing online content providers in including online advertisements on their Web sites. In “Market Segmentation and Information Development Costs in a Two- Tiered Fee-Based and Sponsorship-Based Web Site,” Frederick J. Riggins of the University of Minnesota investigates the cannibalization problem facing information Web sites offering both free and fee-based content. Cannibalization, which occurs when high-type consumers purchase products targeted to low-type consumers, is a phenomenon not restricted to physical goods, as first analyzed by Moorthy and Png in their 1992 Management Science article. Information products, Riggins shows, are also subject to cannibalization. Low-type consumers put up with the discomfort of viewing banner ads in order to access the free, albeit lower quality, Web site content. High-type consumers have the option of paying a fee to access higher quality content, but they may choose to access the free portion of the Web site instead if the lower content quality is still valuable for them. Web site managers need to carefully choose the quality, price, and advertising levels for the two versions of the Web site in order to avoid cannibalization and maximize profits. The optimal quality level for the fee-based content, the high quality product, depends on the expected size of the market. This is a departure from the results of the cannibalization model in the physical goods case. This result has important implications for managers considering the development of high quality information goods, as the huge investments required by the high quality levels may not be justified if the market potential is not large enough. The model also yields a number of very interesting insights related to the impact of advertising provided on the free and fee-based Web sites on prices, quality levels, and ad targeting. The model predictions are confirmed by the recent developments in the online advertising arena, where ad revenue from free Web sites is declining and fee-based Web sites are gaining strength. Rajiv Dewan, Marshall Freimer, and Jie Zhang of the University of Rochester probe these ideas further in “Management and Valuation of Advertisement-Supported Web Sites.” They investigate the optimal combination of content and advertising in the case of free Web sites. Their approach, which combines analytical models and statistical analysis in an innovative way, shows how Web site managers can manipulate the amount of content and the advertisements they include on their Web sites in order to maximize their profits. In the short term, the optimal strategy is to invest more in content (which is attractive to users) and include less advertising (which is unattractive due to increased delay costs incurred while downloading Web pages with ads). Such a strategy makes the Web site especially attractive for new users, who start visiting the Web site. However, as the number of Web site visitors increases, the Web site manager needs to alter the balance between content and advertisements in favor of more ads, which will bring in the sought-after revenues. By treating advertisements as a price for content provision, managers can establish a successful strategy that will increase the number of visitors and raise the market capitalization of the firm. In the final article, “Evolution of Prices in Electronic Markets Under Diffusion of Price-Comparison Shopping,” Cenk Kocas of Michigan State University considers the emergent application of price search technologies on the Internet, and the ways in which the dynamics of interfirm competition are affected as these technologies further diffuse in the marketplace. The author models and simulates the interplay between price-driven consumer and loyalty-driven consumer choice in a set of stylized settings involving firm-to-firm price competition. The diffusion of price-searching technological innovations has the impact of converting loyal customers into switchers, who tend to exhibit heterogeneous instead of homogeneous brand preferences. Heterogeneous brand preferences allow for consumers to exhibit different degrees of brand loyalty. The modeling simulation results center on how firms’ optimal pricing choices are affected as the proportion of price search engine users in the markets goes toward 100 percent. The author finds that even with price search engines present in the marketplace, there are still opportunities for firms that emphasize loyalty approaches. The author characterizes the higher optimal prices that can be profitably chosen as being a result of the negative externality created by uninformed consumers who do not adopt the price search engines. Wrapping up another Special Section makes us think of all the people who unselfishly support our efforts. First in line for our thanks are the authors. We appreciated their willingness to share their work with us at HICSS and for permitting it to be given further consideration in this Special Section of JMIS. We also thank the editor, Vladimir Zwass, whose continued support of this enables us to bring new theoretical and methodological perspectives on interesting research problems to the attention of the IS research community in a timely way. Annually, we receive on the order of 25 to 30 papers and presentation proposals for our mini-tracks at HICSS. Our reviewers do an excellent job to provide useful feedback to the authors for further development of their work for the conference. They deserve our most sincere thanks. Combined with the additional focused feedback that conference presentation offers and further care that reviewers give to the authors’ journal submissions, our review processes encourage the authors to make significant improvements to the quality of their research contributions. It also ensures that the papers are different from what has been published at the HICSS Conference. Rob Kauffman also offers thanks to Eric Clemons of the University of Pennsylvania and Rajiv Dewan of the University of Rochester, for all they do in our work together to make the e-commerce economics and strategy mini-tracks at HICSS one of the premier research presentation opportunities each year for people who pursue research in IS that involves strategy and e-commerce themes. This has been a great partnership and we intend to continue. Finally, these acknowledgments would be incomplete without special recognition for the efforts of Bin Wang, a fourth-year doctoral student in IS at the University of Minnesota. For the last couple of years, Bin has been very effective in her work as the “managing editor” for the HICSS mini-tracks. We offer her hearty thanks for a job well done.