Concentrating Intelligence: Scaling and Market Structure in Artificial Intelligence

Anton Korinek and Jai Vipra

No 33139, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper examines the evolving structure and competition dynamics of the rapidly growing market for foundation models, with a focus on large language models (LLMs). We describe the technological characteristics that shape the AI 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 we evaluate policy remedies that aim to maintain a competitive landscape. Looking ahead to increasingly transformative AI systems, we discuss how market concentration could translate into unprecedented accumulation of power, highlighting the broader societal stakes of competition policy.

JEL-codes: D43 K21 L4 L86 O33 (search for similar items in EconPapers)
Date: 2024-11
New Economics Papers: this item is included in nep-ain, nep-cmp, nep-com, nep-ind, nep-reg and nep-tid
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Published as Anton Korinek & Jai Vipra, 2025. "Concentrating intelligence: scaling and market structure in artificial intelligence," Economic Policy, vol 40(121), pages 225-256.

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