Sequential Competition and Innovation
2018; RELX Group (Netherlands); Linguagem: Inglês
10.2139/ssrn.3209382
ISSN1556-5068
Autores Tópico(s)Digital Platforms and Economics
ResumoThere is not a day goes by without a passionate debate concerning Big Tech companies; while the main concern of governments seems to be related to social justice, a growing worry is associated with the consequences that large firms have on consumer welfare; nowadays these big entities engage in serial start-ups acquisition to preclude the en- trance of competitors in their markets. Accordingly, I build a dynamic model where firms are endowed with a search technology used for designing new products that are subject to linear price-inverse demand function. Thanks to the relative tractability of my framework, I compute many important statistics in closed form. Then, I show that the rise of large entities is part of a natural mechanism where giants emerge from the ashes of their predecessors. Though the actions of large technological companies impair welfare in the short-run, their consequences in the long-run seem negligible, suggesting a laissez-faire approach in which, organizations engaging in these type of misconduct simply disappear in the long-term.
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