ADDED VALUE AND PRICING WITH INFORMATION TECHNOLOGY

This study evaluates the extent to which the added value to customers from a supplier's application of information technology (IT) is manife sted through premium prices of a traded good. The study demonstrates t hat IT can add value to an otherwise undifferentiated good and shows h ow these benefits accrue to customers from the adoption of IT. Analyzi ng a case in which the traded good is a homogeneous commodity-commerci al fueling-our study shows that the critical impacts of IT are conveni ence and control-that is, convenience that provides improved access to fuel and control that reduces problems of delegating purchasing autho rity for the customer. The value of this additional service is exhibit ed in premium prices customers are willing to pay for the IT-enhanced traded good, relative to the same good without IT. Compared to the pri ce without IT, statistical analysis of the supplier's pricing history demonstrates that the application of IT to commercial fuel yielded pri ce premiums of between five and 12 percent of the retail fuel price.