Principals, Agents and Prisoners: An Economical Perspective on Information Systems Development Practice

Information systems development takes place within an economical context. However, the economical conditions, which shape systems development in practice, are hardly researched. In this paper we are investigating the question how a given price structure influences systems development projects. Our analysis is based on a multi case study and a Grounded Theory inspired research approach. Our work is informed by economic theories, which deal with the relationship of suppliers and customers and their mutual dependency. We thus apply principal-agent theory and economic game theory in form of the prisoner’s dilemma. As a result we provide three interlinked models for understanding the impact of pricing structure on systems development practice. The main elements of these models are pricing structure, risk distribution and price level, and opportunistic behavior. We discuss how these elements are interrelated and examine their impact on information systems development in practice.