II Motivating example Suppose the program becomes more useful for all firms

Ii motivating example suppose the program becomes

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II. Motivating exampleSuppose the program becomes more useful for all firmsDoes that help the firm that gets it?Does it help the programmer?What happens if asset has different costs for different firms (suppose installation costs after auction differ)?
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II. Motivating example Summary of insights: 1. Assets will (tend to) go where they can be used most beneficially 2. “Winner” of asset gets CA equal to difference between its valuation and next highest valuation (relative advantage/added value again!) 3. Seller of asset benefits when asset becomes more productive for everyone
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III. Assets and Competitive AdvantageExample shows the key question: What determines the variation in the net benefits of assets across firms?Let’s consider three possibilities:1.Existing ownership2.Firm size3.Existence of complementary assets
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III. Assets and Competitive Advantage 1. Existing ownership While companies will tend to accumulate assets that confer competitive advantage, this is NOT in and of itself a source of competitive advantage Suppose your firm happens to acquire an asset by accident. Does that change anything about whether you should have it and how much value you'll capture? Opportunity cost of using it is still what you can get from selling it to next-highest company Just like cell phone lottery example
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III. Assets and Competitive Advantage 2. Firm size can matter Larger firms benefit if asset has a proportional benefit but a fixed cost E.g., a national ad campaign makes all consumers 10% more likely to buy Higher net benefit for larger firms if nat’l campaign’s cost is the same for everyone Also works if cost rises with firm size, but at a slower rate than benefits
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