![]() That’s why it is costlier per good sold for Microsoft to operate its retail stores than for Apple. Fixed costs, too, are less onerous when they are spread across many goods rather than just a few. For instance, buyers of large volumes can often negotiate discounts and thus get better deals than those purchasing smaller quantities. Scale effects manifest themselves in various forms. Scale effects signify the downward slope of marginal costs to produce or sell a particular good the more a particular actor sells. #Macstitch 2016 upgrades driversThere are many drivers for such a concentration dynamic, but the most prominent and well-analyzed are so-called scale effects. Markets become concentrated when one or a small number of market participants enjoy a significant cost differential in offering products or services. In the second part, I put forward such a measure, carefully tailored to address the crippling dynamic that leads to market concentration, and map out the consequences of such a measure should it be enacted. #Macstitch 2016 upgrades driverI then explain why this novel driver – the feedback effect – cripples market competition differently than existing drivers, and thus requires novel regulatory measures. The first part of this chapter describes the concentration process in greater detail, and how the dynamic is fueled by a new driver. In its place, I suggest a novel regulatory measure – the progressive data-sharing mandate – that is specifically designed to tackle the very concentration dynamic we witness. This is because while we see market concentration, the reason for that concentration has shifted, rendering much of the existing regulatory toolkit to ensure competitive markets essentially ineffective. In this chapter, I suggest that these concerns are well-warranted, but that the remedies proposed are ill-suited to address the challenge we face. Unsurprisingly, a growing number of commentators has called for strengthening existing antitrust and competition laws to ensure that the concentration process is slowed, or at the very least does not lead to uncompetitive behavior by market-dominating firms. The market for domain names is cornered by GoDaddy, Netflix controls more than 75 percent of the US video streaming market, and Amazon accounts for 43 percent of US online retail sales. Digital markets, in particular, seem to move swiftly towards concentration. Apple is the world’s largest smartphone producer by revenue, Google dominates online search with a market share of well over 80 percent globally, and Facebook rules the social media platform market, with over 2 billion users worldwide in 2017. Each of these three has also cornered an enormous portion of a market. Google/Alphabet’s profits grew by an even stronger 33 percent, and Facebook topped both with an increase in profits of 79 percent. Just in the fall of 2017, Apple – already the world’s most valuable company by market capitalization – announced an increase in profits of 19 percent. While business dynamism has been stagnant for years, a few firms grow fast, amass astonishing profits, and capture a huge share of the market. Footnote 1 Today, his dire prediction seems to ring true. A century and a half ago, Karl Marx wrote about markets becoming concentrated over time – the fundamental genetic defect that would eventually lead to capitalism’s demise and spur the proletarian revolution. ![]()
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