Portal de Periódicos da CAPES

Sequential Competition and Innovation

2018; RELX Group (Netherlands); Linguagem: Inglês

10.2139/ssrn.3209382

1556-5068

Julien Blatt,

Digital Platforms and Economics

There 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.