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Concentrating Intelligence:Scaling and Market Structure in Artificial Intelligence

Author

Listed:
  • Anton Korinek

    (University of Virginia and Centre for the Governance of AI)

  • Jai Vipra

    (University of Virginia and Centre for the Governance of AI)

Abstract

This paper examines the evolving structure and competition dynamics of the rapidly growing market for foundation models, focusing on large language models (LLMs). We describe the technological characteristics that shape the industry and have given rise to fierce competition among the leading players. The paper analyzes the cost structure of foundation models, emphasizing the importance of key inputs such as computational resources, data, and talent, and identifies significant economies of scale and scope that may create a tendency towards greater market concentration in the future. We explore two concerns for competition, the risk of market tipping and the implications of vertical integration, and use our analysis to inform policy remedies to maintain a competitive landscape.

Suggested Citation

  • Anton Korinek & Jai Vipra, 2024. "Concentrating Intelligence:Scaling and Market Structure in Artificial Intelligence," Working Papers Series inetwp228, Institute for New Economic Thinking.
    • Handle: RePEc:thk:wpaper:inetwp228
    DOI: 10.36687/inetwp228
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    File URL: https://doi.org/10.36687/inetwp228
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    More about this item

    Keywords

    Artificial Intelligence; economic concentration; vertical integration; AI regulation.;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law

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