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http://dx.doi.org/10.14400/JDC.2021.19.7.095

The Effect of AI and Big Data on an Entry Firm: Game Theoretic Approach  

Jeong, Jikhan (School of Economic Sciences, Washington State University)
Publication Information
Journal of Digital Convergence / v.19, no.7, 2021 , pp. 95-111 More about this Journal
Abstract
Despite the innovation of AI and Big Data, theoretical research bout the effect of AI and Big Data on market competition is still in early stages; therefore, this paper analyzes the effect of AI, Big Data, and data sharing on an entry firm by using game theory. In detail, the firms' business environments are divided into internal and external ones. Then, AI algorithms are divided into algorithms for (1) customer marketing, (2) cost reduction without automation, and (3) cost reduction with automation. Big Data is also divided into external and internal data. this study shows that the sharing of external data does not affect the incumbent firm's algorithms for consumer marketing while lessening the entry firm's entry barrier. Improving the incumbent firm's algorithms for cost reduction (with and without automation) and external data can be an entry barrier for the entry firm. These findings can be helpful (1) to analyze the effect of AI, Big Data, and data sharing on market structure, market competition, and firm behaviors and (2) to design policy for AI and Big Data.
Keywords
artificial intelligence; big data; data sharing; entry game; game theory;
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