Endogenous Firm and Information Rent Under Demand Uncertainty

Li, Yanfei and Yao, Shuntian and Chia, Wai-Mun (2009): Endogenous Firm and Information Rent Under Demand Uncertainty.

Abstract

This paper takes the firm as an information processing unit. It provides a model that involves the division of labour and specialization, and demand uncertainty. It shows that conditionally, a firm with information processing ability comes into being endogenously, with information rent generated. The size of the rent depends on the level of uncertainty, market competition, and the firm’s information processing ability. Information and Communication Technology is assumed to affect the information processing ability, therefore impacting on the rent. Finally, case studies on the wholesale and retail industry and the finance and insurance industry of 10 OECD countries are conducted.

• Item Type: MPRA Paper
• Language: English
• Keywords: demand uncertainty, information processing, firm, information rent
• Subjects: D - Microeconomics > D2 - Production and Organizations; L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty; D - Microeconomics > D4 - Market Structure, Pricing, and Design; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance

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