An interesting economics paper about why OpenAI is moving so strongly into vertical integration.

When there's a monopolist whose product is used as an input to a downstream product, they'll vertically integrate to maximize profit.

The reason: downstream customers will underutilize the input from the monopolist's perspective.

If OpenAI charges $5/unit for API access (to maximize API profit), downstream developers will build conservatively.

But OpenAI's actual cost might only be $1/unit.

Independent developers, facing the $5 price, produce less AI-powered output than would maximize OpenAI's total profit.

By vertically integrating, OpenAI can produce at the level that maximizes system-wide profit - as if the input were priced at $1, but capturing all the value themselves.