Document Type
Thesis
Date of Award
9-30-1985
Degree Name
Master of Science in Industrial Engineering - (M.S.)
Department
Industrial and Management Engineering
First Advisor
Carl Wolf
Abstract
The economic rational of many contemporary businesses is the provision of services or labor saving equipment which their customers' pay for in order• to save themselves time. A major decision such an enterprise must make prior to entry into the market i=_ whether enough of a market exists to make its entry worthwhile. Such firms would be able to make better resource allocation decisions if they could have a quantitative measure of the relationship of their consumer's valuation of time vis a vi money. This study proposes such a measure.
Interactive information systems, whose viability depends to a large degree on time savings to the user, was used as a basis for the study and development of a measurement because students and professors both comprise a large potential consumer group for this service and they were available to take part in the research. The model's theoretical justification rests on utility theory which was used to develop a relationship of time to money. Using the von Neuman/Morgenstern gamble, a small sample of faculty, graduate and under graduate students attending New Jersey Institute of Technology were interviewed via an interactive computer program. The collected data was used to specify an equation which defined the dollar to time conversion rate for each of the subjects. The resulting data indicated that students in the sample group placed a unitary monetary value per hour on time saving between zero And nine hour’s.
While based on a small sample, these findings suggest that utility theory may indeed provide an effective, consistent and operationally effective method for predicting consumer behavior with respect to time saving products. An additional very interesting finding was a "Conversion Threshold", that is a value which had to be exceeded before a subject would feel "indifferent". Once the conversion threshold was crossed subjects were not willing to reverse their decisions without additional incentives in the form of added value thus suggesting a broader interpretation of indifference curves. Further research is needed to assess these implications.
Recommended Citation
Kalley, Gordon S., "An investigation of the application of utility theory to determine the value of time: the demand for interactive information systems in student markets" (1985). Theses. 3441.
https://digitalcommons.njit.edu/theses/3441
