Search

Ajay Agrawal, Joshua Gans, and Avi Goldfarb: Power and Prediction: The Disruptive Economics of Artificial Intelligence Harvard Business Review Press, 2022 For the second time, Agrawal, Gans, and Goldfarb (hereafter [...]

Demand for highly skilled workers is influenced by the surge of information technology, workplace reorganization, new products and services and resulting in the disadvantage of less skilled labor.

Rapid and sustained technological innovation characterizes the computer industry. This trend is evident in the introduction of better, faster and cheaper integrated circuits and other computer components, resulting in the development of improved computers and new kinds of hardware. Demand and supply forces lower the barriers to entry for players, which pave the way for smaller entrepreneurial firms to replace their more established competitors. The fierce technological competition in the industry is driven not by firms but by computer platforms, which explains the divided technical leadership in various market segments.

This paper examines the short-run dynamics of manufacturing costs by detailing how plants in the U.S. automobile industry change output. Weekly data show a variety of margins on which firms adjust production. These margins, which are distinct from the usual factor demand choices, differ in their lumpiness, their adjustment costs, and their variable costs. The existence of these margins explains several empirical puzzles of output fluctuations. Using a theory of the short-run dynamic cost function, we are able to infer some of the characteristics of the underlying cost function from the dynamic behavior of the different margins., The structure of firm-level output and adjustment costs is an important element of many economic theories. In business cycle theories, the shape of the cost function determines whether shocks to [...]

A study of the effect of the oil-shock sectoral shifts between 1972 and 1984 on the automobile industry indicates that these changed demand during the period. Capacity utilization decreased with the change in desired product mix. Automobile companies acted to shift capacity between size segments to increase capacity utilization in the intermediate run, but this produced inferior-quality products in the intermediate run.

Reliance on a 'representative' approach in studying industrial behavior during the Great Depression obscures economically interesting patterns. A newly discovered data source lets us form and study an establishement-level panel dataset on the motor vehicles industry, one of the largest in 1929. Substantial intra-industry heterogeneity led to large composition effecdts in employment, output, and productivity: the large number of plants that shut down were unlike the continuing one. Oddly, output does not seem to have shifted among continuing producers to the relatively low-cost ones. Reconciling these should illuminate links between industrial organization and macroeconomics.

Economy-wide increasing returns to scale embodied in a general purpose technology (GPT) and its applications are often a key source of long-run growth. Yet the successful exploitation of increasing returns calls for coordination on a particular technological direction, reducing flexibility and choice ex post and potentially creating a growth bottleneck. When the bottleneck is controlled by a single firm, the resulting entry barriers reduce the ability of demanders to choose superior, alternative technologies. We examine how such a growth bottleneck can eventually be overcome under certain key conditions. Demand must be fundamentally diverse so that the original GPT does not serve all demanders. Firms barred from entry into the primary GPT market can then reallocate innovative resources to create new markets to meet the unserved demand. The demand in these new markets must be valuable enough (even if not as valuable as in the primary GPT market) to generate a positive-feedback cycle that results in considerable technical advance in the alternative GPT. This ultimately can lead to indirect entry by the alternative GPT into the original GPT market if and when it becomes strong enough to compete with the original GPT. This sequence of (i) increasing returns to scale around a GPT, (ii) reallocation of innovative resources around growth bottlenecks, and (iii) indirect entry has growth implications. A large contribution to growth follows the exploitation of increasing returns to scale in the original GPT. Much later, another large contribution to growth follows when demand is finally met by an alternative, competitive GPT. Between these two periods falls a period of lesser contributions to growth due to the dominant firm bottleneck. The market-based resolution of the bottleneck is not merely a theoretical possibility. We illustrate the role of this sequence in the two most important technologies for automating white-collar work of the past 50 years. [ABSTRACT FROM PUBLISHER]

Whole eras of technical progress and growth appear to be driven by a few `General Purpose Technologies' (GPT's), such as the steam engine, the electric motor, and semiconductors. GPT's are characterized by pervasiveness, inherent potential for technical improvements, and `innovational complementarities', giving rise to increasing returns-to-scale. However, a decentralized economy will have difficulty in fully exploiting the growth opportunities of GPT's: arms-length market transactions between the GPT and its users may result in `too little, too late' innovation. Likewise, difficulties in forecasting the technological developments of the other side can lower the rate of technical advance of all sectors. Key words: Technical change; Growth; Social returns; Coordination JEL classification: O30; O40; L10

A study was conducted to establish how computerization of the workplace has influenced a significant rise in income inequality in developed countries. Results indicate that the emergence of information and communication technologies has caused the reduction of the labor content of industrial processes. Organization computing has also triggered the trend away from low-wage blue-collar work toward high-paying occupations.

Abstract. By what process does technical change in information technology (IT) increase economic welfare? How does this process result in increases in welfare at different rates in different countries and regions? This paper considers existing literature on measuring the economic benefits from information technology, emphasizing comparative issues and user studies. Following Bresnahan and Trajtenberg (1995), we call the invention associated with customizing the technological frontier to the unique needs of users in particular regions "co-invention", placing emphasis on understanding how its determinants vary across users in different regions. We develop a framework for understanding the processes behind value-creation, demand-side heterogeneity and co-inventive activity. Then we discuss why these processes make measuring the welfare benefits from advances in information technology particularly difficult. We highlight the metrics currently available for measuring the economic pay-out of the IT revolution and identify which of these vary meaningfully in a comparative regional context. Finally, we finish with observations about further areas of research. [ABSTRACT FROM AUTHOR]

Focuses on the development of an approaches using economic methodologies to measure market power. Response of firms to the changes in the economic environment; Variation in the electricity of demand; Protection of competition though the antitrust law.

This article profiles Richard E. Quandt, a teacher, colleague and mentor at Princeton University. Richard's contributions to the study of economics take on a wide variety of forms. As an econometrician, he witnessed and participated in a modeling revolution as well as the computer revolution. He was a pioneer in discrete dependent variables, in switching regime models, in tests of the standard regression assumptions, in relaxing assumptions about the distribution of error terms, and in many other now-common areas. As an economic theorist, Richard made important contributions to the theory of demand and to models of oligopoly supply. He worked on the impact of uncertainty, on rules of thumb, on capital rationing, on stability, as well as on equilibrium existence. As a colleague, teacher and mentor, Richard encouraged us all in the direction of the best theory and the best measurement method, and in their application to important problems.

Focuses on the consequences of entry and market structure. Rise of large mass-production firms; Relevance of welfare economics; Importance of firm heterogeneity in entry and exit.

The short-run supply and short-run marginal cost that the authors of the article studied are those of North American primary aluminum industry over the period 1958-83. It should be noted that the discussion of the effect on the allocation of resources of not having an auction system for the award of licenses has been solely concerned with the consequences for the purchasing agreements of the Gas Council. There remain advantages of an auction system in choosing licenses who can use the rights granted most productively. The failure of the use of an auction system in Great Britain to award licenses to exploit North Sea gas has had adverse effects on the allocation of resources.

This paper proposes an empirical framework for measuring the effects of entry in concentrated markets. Building on models of entry in atomistically competitive markets, we show how the number of producers in an oligopolistic market varies with changes in demand and market competition. These analytical results structure our empirical analysis of competition in five retail and professional industries. Using data on geographically isolated monopolies, duopolies, and oligopolies, we study the relationship between the number of firms in a market, market size, and competition. Our empirical results suggest that competitive conduct changes quickly as the number of incumbents increases. In markets with five or fewer incumbents, almost all variation in competitive conduct occurs with the entry of the second or third firm. Surprisingly, once the market has between three and five firms, the next entrant has little effect on competitive conduct. [ABSTRACT FROM AUTHOR]

This article discusses the author's views on the formulation of the problem of consistent conjectures. His reply uses a new formulation in order to resolve researcher Arthur Robson's troubling example of nonexistence, and to make the problem clearer. It also shows why the author's original approach was sensible only for the linear demand curve case. A slightly more general approach used here has consistent conjectures in Robson's quadratic inverse demand example. Robson writes the consistent conjectures problem as selection of the strategic variables for oligopoly. A natural reformulation of the problem suggested by Robson's comment reverses the authors finding of nonexistence. The task of a consistency criterion is to select one noncooperative oligopoly solution concept from the many possible. The selection criterion should always choose something (existence), yet should never choose many things (uniqueness). In this reply, the criterion was weakened in order to ensure existence, whether this destroys uniqueness is an open question.