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How Do Value Creation and Competition Determine Whether a Firm Appropriates Value?

Author

Listed:
  • Glenn MacDonald

    () (Olin School of Business, Washington University in St. Louis, St. Louis, Missouri 63130)

  • Michael D. Ryall

    () (Simon Graduate School of Business, University of Rochester, Rochester, New York 14627)

Abstract

How does competition among economic actors determine the value that each is able to appropriate? We provide a formal, general framework within which this question can be posed and answered, and then provide several results. Chief among them is a condition that is both required for, and guarantees, value appropriation. We apply our methodology to (i) assess the familiar notion that uniqueness, inimitability, and competition imply value appropriation, and (ii) determine the value appropriation possibilities for an innovator whose unique discovery is of use to several others who can compete for the right to use it.

Suggested Citation

  • Glenn MacDonald & Michael D. Ryall, 2004. "How Do Value Creation and Competition Determine Whether a Firm Appropriates Value?," Management Science, INFORMS, vol. 50(10), pages 1319-1333, October.
  • Handle: RePEc:inm:ormnsc:v:50:y:2004:i:10:p:1319-1333
    as

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    File URL: http://dx.doi.org/10.1287/mnsc.1030.0152
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    References listed on IDEAS

    as
    1. Makowski, Louis & Ostroy, Joseph M, 1995. "Appropriation and Efficiency: A Revision of the First Theorem of Welfare Economics," American Economic Review, American Economic Association, vol. 85(4), pages 808-827, September.
    2. Adam M. Brandenburger & Harborne W. Stuart, 1996. "Value-based Business Strategy," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 5(1), pages 5-24, March.
    3. Martin J. Osborne & Ariel Rubinstein, 1994. "A Course in Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262650401, January.
    Full references (including those not matched with items on IDEAS)

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