Monday, November 26, 2018

Predictability, Innovation, and Competition in Bitcoin's Mining Market

Robert Parham, University of Virginia and Einar C. Kjenstad, University of Aarhus discuss Predictability, Innovation, and Competition in Bitcoin's Mining Market.

ABSTRACT: We construct and estimate a dynamic oligopoly model of the Bitcoin mining market. Mining equipment manufacturers produce differentiated durable capital goods and endogenously choose optimal investments in R&D. Miners make dynamic purchase decisions based partly on beliefs regarding manufacturers' future choices. We show that policy-relevant values, such as aggregate R&D investment by manufacturers and network energy consumption, are predictable given only a Bitcoin price-path. We further show the industry is uniquely suited to test the impact of product market competition on innovation, a much-debated subject in the economics of R&D literature.

https://lawprofessors.typepad.com/antitrustprof_blog/2018/11/predictability-innovation-and-competition-in-bitcoins-mining-market.html

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