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The Artificial Intelligence Shakeout to Come
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Abstract:
The field of artificial intelligence (AI) is going through a process of industrialization and commodification; will it also experience a shakeout in the number of firms active in the market, as many industries do? We focus on the AI models market and assess whether its evolution features regularities that are usually expected in industries transitioning from birth to maturity, and from turbulence due to uncertainty and competition to stability featuring oligopolistic market structures and high entry barriers. We outline stylized facts of the AI model market in terms of entry, capacity expansion, pricing dynamics and innovation, and compare these with those characterizing industries that experienced a shakeout. To place the possibility of an AI shakeout within a broader framework, (i) we outline two models from the literature on industry-life cycles and assess which one rationalizes better the forces at work in the AI industry; and (ii) we connect our discussion with evidence of a risky financial bubble forming around the industry. The analysis has important implications for competition policy.
Bio:
Simone Vannuccini is the Chair of Economics of Artificial Intelligence and Innovation (JuniorProfessor) at the University Côte d'Azur and the laboratory GREDEG-CNRS in Nice, France. There, together with his team (chAIre), he leads research and teaching on the topic of AI Economics. Simone held positions at the Science Policy Research Unit (SPRU) of the University of Sussex, Imperial College London, and Friedrich Schiller University Jena (Germany) and the Max Planck Institute of Economics, where he also obtained his PhD. Simone publishes in top journals in the field of economics of innovation, and his research focuses on the 'irregular regularities' of technology evolution, seen through the lenses of the economics of AI, industrial organization and dynamics, digital economics, and science, technology, innovation and industrial policy.