AI Adoption in a Monopoly Market

18 Pages Posted: 11 May 2022 Last revised: 2 Jun 2022

See all articles by Joshua S. Gans

Joshua S. Gans

University of Toronto - Rotman School of Management; NBER

Date Written: June 2, 2022


The adoption of artificial intelligence (AI) prediction of demand by a monopolist firm is examined. It is shown that, in the absence of AI prediction, firms face complex trade-offs in setting price and quantity ahead of demand that impact on the returns of AI adoption. Different industrial environments with differing flexibility of prices and/or quantity ex post, also impact on AI returns as does the time horizon of AI prediction. While AI has positive benefits for firms in terms of profitability, its impact on average price and quantity, as well as consumer welfare, is more nuanced and critically dependent on environmental characteristics.

Keywords: artificial intelligence, prediction, monopoly, make-to-stock, make-to-order

JEL Classification: D21, D81, O31

Suggested Citation

Gans, Joshua S., AI Adoption in a Monopoly Market (June 2, 2022). Available at SSRN: or

Joshua S. Gans (Contact Author)

University of Toronto - Rotman School of Management ( email )



NBER ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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