Endogenous Firm and Information Rent Under Demand Uncertainty
Yanfei Li (),
Shuntian Yao and
MPRA Paper from University Library of Munich, Germany
Increasing evidence shows that ICT investment improves firm performance. Among the many explanations on why ICT contributed to labor productivity surge since 1990, this is the most promising one. It is thus necessary to take the firm as an information processing organization, putting it in stochastic environment. As perfect information is no longer the assumption, that firms exogenously exist in the economy would no longer be assumed here. With these in mind, the paper provides a model that involves the division of labor and specialization, the production and consumption under demand uncertainty, and the value of information. It shows that under certain business conditions, a firm with certain type of information processing ability comes into being endogenously. A surplus, which could reasonably be argued as information rent, is generated with firm production. The size of this information rent depends on a few key parameters, including the level of uncertainty, the degree of market competition, and the cost of information processing. To test the model, case studies on the financial industry and the wholesale and retail industry are conducted, which corroborate the theoretical predictions of the model.
Keywords: demand uncertainty; information processing; firm; information rent (search for similar items in EconPapers)
JEL-codes: D2 L2 D8 D4 L1 (search for similar items in EconPapers)
Date: 2009-02-12, Revised 2009-02-16
New Economics Papers: this item is included in nep-cta
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
https://mpra.ub.uni-muenchen.de/13506/1/MPRA_paper_13506.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/14867/1/MPRA_paper_14867.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/19450/3/MPRA_paper_19450.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/21128/2/MPRA_paper_21128.pdf revised version (application/pdf)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:13506
Access Statistics for this paper
More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().