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The nature of the Artificially Intelligent Firm - An economic investigation into changes that AI brings to the firm

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  • Wagner, Dirk Nicolas

Abstract

With the arrival of Artificial Intelligence (AI), the nature of the firm is changing and economic theory can provide guidance to businesses as well as to politics when formulating adequate strategies for this unknown terrain. By interpreting AI as a new type of agent within the firm, the theory of the firm can serve as a lingua franca to connect computer sciences and social sciences when dealing with the interdisciplinary phenomenon of AI. To achieve this, this paper adopts the perspective of the economic theory of the firm to systematically explore the changes that AI brings to the institution of the firm. In total, five interrelated propositions are discussed that are rooted in the traditional theory but trace the nature of the Artificially Intelligent Firm: AI intensifies the effects of economic rationality on the firm (1). AI introduces a new type of information asymmetry (2). AI can perforate the boundaries of the firm (3). AI can create triangular agency relationships (4) and AI has the potential to remove traditional limits of integration (5).

Suggested Citation

  • Wagner, Dirk Nicolas, 2020. "The nature of the Artificially Intelligent Firm - An economic investigation into changes that AI brings to the firm," Telecommunications Policy, Elsevier, vol. 44(6).
    • Handle: RePEc:eee:telpol:v:44:y:2020:i:6:s030859612030046x
    DOI: 10.1016/j.telpol.2020.101954
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    More about this item

    Keywords

    Artificial intelligence; Machine learning; Theory of the firm; Asymmetric information; Principal-agent problem;
    All these keywords.

    JEL classification:

    • A12 - General Economics and Teaching - - General Economics - - - Relation of Economics to Other Disciplines
    • B12 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Classical (includes Adam Smith)
    • B15 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Historical; Institutional; Evolutionary
    • B25 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Historical; Institutional; Evolutionary; Austrian; Stockholm School
    • B4 - Schools of Economic Thought and Methodology - - Economic Methodology
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General

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