Firm Capabilities and Industry Structure in the Information Age
The past twenty years have witnessed the emergence of internet conglomerates fuelled by unprecedented levels of acquisitions. We provide a simple theoretical model of firm and market structure to shed light on this phenomenon. Each firm has a set of scarce capabilities and different markets value different capabilities. As a firm gains more capabilities valued by a given market, it becomes a stronger competitor in that market. We represent this information in firm and market hypergraphs and study the stable industry structures, where there no longer exists a profitable merger or demerger. We find that if markets begin to value additional capabilities, such as data about their customers or the ability to sell online, the resulting more-connected market structure can support larger firms in equilibrium. Moreover, the change is not smooth. There is a sharp phase transition in the potential size of the largest firms. We apply our framework to analyze consumer welfare and policy.

details found here: www.davidronayne.net/lgn-seminar
Date: 15 January 2019, 12:45 (Tuesday, 1st week, Hilary 2019)
Venue: Nuffield College, New Road OX1 1NF
Venue Details: Butler Room of D staircase
Speaker: Matt Elliot (University of Cambridge )
Organising department: Department of Economics
Part of: Learning, Games and Network Seminar
Booking required?: Not required
Audience: Members of the University only
Editor: Melis Clark