Strategic Outsourcing to Shared AI Platforms

Byung-Cheol Kim () and Keeyoung Rhee ()
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Byung-Cheol Kim: Culverhouse College of Business, University of Alabama, Tuscaloosa, AL, USA
Keeyoung Rhee: Department of Economics, Sungkyunkwan University, Seoul, Korea

No 26-01, Working Papers from NET Institute

Abstract: Firms increasingly outsource innovation to AI platforms serving their competitors, allowing one client's problem solving to improve what the platform delivers to another. We study a duopoly in which firms choose between in-house innovation and a shared AI platform. Cross-client learning occurs when both firms use the platform. Stronger learning can initially support joint use, yet eventually destabilize it as each firm's problem solving increasingly benefits its rival. Too many or too few firms may adopt the platform relative to a coordinated benchmark that maximizes their combined payoff subject to symmetric effort. Blocking cross-client learning can reduce competitive harm yet leave the firms collectively worse off.

Keywords: shared AI platforms; outsourcing; coopetition; cross-client learning; technology adoption (search for similar items in EconPapers)
JEL-codes: D43 L22 L24 O32 (search for similar items in EconPapers)
Pages: 58 pages
Date: 2026-09
New Economics Papers: this item is included in nep-mic
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