A government-run AI wouldn't just be competition—it would act as a "reality check" to stop private AI companies from overcharging you.
SSRN · March 13, 2026 · 6302962
Why it matters
Economists found that a 'Public AI Option' reshapes the market primarily by increasing consumer price sensitivity. Even if users don't actually switch to the government-backed service, its mere presence creates a 'salient benchmark' that limits how much private companies can charge, effectively acting as a market-wide price ceiling.
From the abstract
As governments increasingly debate public or government-backed AI services, understanding how such services reshape markets has become more important. Because revealed-preference data is not yet available for large-scale consumer-facing public AI, we leverage a discrete choice experiment with 4,215 market-eligible U.S. adults to provide an ex-ante evaluation of public option entry. We find that public option availability compresses incumbent residual valuations and increases private-sector price