Conclusion

2020 ◽  
pp. 257-258
Author(s):  
Nicolas Petit
Keyword(s):  
Network Externalities ◽  
Digital Economy ◽  
Increasing Returns ◽  
Oligopoly Competition ◽  
Intensity Of Competition

This concluding chapter explains that the picture of big tech firms as monopolists is intuitively attractive, but analytically wrong. The digital economy has a variety of properties that work together to impose on firms a pressure equivalent to oligopoly competition. In particular, network externalities, increasing returns to adoption, and tipping effects produce significant discontinuities. This influences the direction and intensity of competition. Tech firms compete with others by a process of indirect entry, and reconfigure existing channels of competition.

Endogenous Power and Crises of the Liberal Order

2019 ◽  
Vol 139 (2-4) ◽  
pp. 385-406
Author(s):  
Richard Sturn
Keyword(s):  
Public Goods ◽  
Public Good ◽  
Network Externalities ◽  
Incomplete Contracts ◽  
Higher Order ◽  
Digital Economy ◽  
Economic Power ◽  
Political Force ◽  
Robust Algorithm ◽  
First Order

The liberal order is conceptualized as an artificial public good of higher order associated with nondiscriminatory provision of first-order public goods such as security and stability of possession. Problems of the liberal order and of liberalism as a political force are explained as a combined result of political challenges endogenously emerging in the economic sphere (including modern phenomena such as incomplete contracts, network externalities, and asymmetries specifically relevant in the digital economy), intertwined with problematic political reactions. There is no robust algorithm for coping with ensuing vicious circles of economic power and shadow politics, due to the intricacies of institutional adaptations required for maintaining the basic architecture of the liberal order under changing circumstances. Conclusions are offered with regard to current challenges of protectionist populism.

Big Tech and the Digital Economy

2020 ◽  
Author(s):  
Nicolas Petit
Keyword(s):  
Twentieth Century ◽  
Competition Policy ◽  
Business Models ◽  
Digital Economy ◽  
Regulatory Agencies ◽  
Policy Intervention ◽  
Competitive Pressure ◽  
The Subject ◽  
Monopoly Rents ◽  
Oligopoly Competition

To date, world antitrust and regulatory agencies have invariably described large technology companies—such as Google, Amazon, Microsoft, Apple, and Facebook—as dominant, bottleneck or gatekeeping companies comparable to the textbook monopolists of the early twentieth century. They have proceeded on this basis to discipline their business activities with unprecedented financial penalties and other regulatory obligations. This “techlash” is the subject of this book. Proceeding from the observation that big tech firms engage in both monopoly and oligopoly competition across digital markets, the book introduces a theory of moligopoly competition. It suggests that rivalry-spirited antitrust and regulatory laws are both conceptually and methodologically impervious to the competitive pressure that bears on big tech firms, resulting in a risk of well-intended but irrelevant policy intervention. The book proposes a refocusing of competition policy towards certain types of tipped markets where digital firms extract monopoly rents, and careful adoption of regulation toward other social harms generated by big tech’s business models.

scholarly journals Path-dependence without increasing returns to scale and network externalities

1996 ◽  
Vol 29 (1) ◽  
pp. 159-172 ◽  
Author(s):  
Alfons Balmann ◽  
Martin Odening ◽  
Hans-Peter Weikard ◽  
Wilhelm Brandes
Keyword(s):  
Path Dependence ◽  
Network Externalities ◽  
Returns To Scale ◽  
Increasing Returns ◽  
Increasing Returns To Scale

scholarly journals Entitlement problems in digital markets and how antitrust shapes the appropriation of network externalities

2021 ◽  
pp. 178359172110031
Author(s):  
Linus J. Hoffmann
Keyword(s):  
Value Creation ◽  
Network Externalities ◽  
Digital Economy ◽  
Value Capture ◽  
Business Decision ◽  
Potential Harm ◽  
Competitive Effects ◽  
For Profit ◽  
Digital Asset ◽  
Software Platforms

The engine of value creation in the digital economy is network externalities, i.e. the phenomenon by which the value to a new user from adopting a good or service increases in the number of users who already adopted it. But network externalities are not manna from heaven. They are ‘sponsored’ by firms who make demand expanding investments. In areas with imperfect property institutions like the digital economy, a key business decision for profit maximizing firms consists in devising value capture strategies to appropriate their investments. This paper identifies three recurrent types of appropriation disputes in digital markets: Access to software platforms, limitations to the exploitation of raw data and claims over digital content. At the heart of each dispute lies the controversial exercise of an entitlement over a digital asset that is embedded in a context of or exhibits itself network externalities. The appropriation of this asset and its integration into the firm’s ecosystem could make the firm benefit from network efficiencies. Controlling the digital asset in question becomes a proxy. Appropriation strategies by proxy can have pro- and anti-competitive effects. This is why each dispute can not only be understood as a problem of appropriability, but also as a problem of potential harm to competition. And indeed, competition enforcers have brought forward various cases with underlying appropriation disputes. This paper tracks the influence of three of them on the appropriability of assets in the digital economy, and on digital firms’ strategies to capture the value of network externalities.

Economics of Big Tech: Monopoly v Uncertainty

2020 ◽  
pp. 64-92
Author(s):  
Nicolas Petit
Keyword(s):  
Economic Theory ◽  
Technological Change ◽  
Economic Model ◽  
Network Externalities ◽  
Regulatory Policy ◽  
Economic Models ◽  
Increasing Returns

This chapter focuses on the economics of big tech. It asks whether the standard monopoly model of received economic theory is the appropriate framework to analyze big tech firms. The question is important; the monopoly model underpins antitrust and regulatory policy. It provides the intellectual foundation for the assessment of anticompetitive conduct and transactions in digital markets. However, economic models on which laws are based may lose relevance as a result of technological change. Our analysis suggests that the average tendencies of big tech firms do not fit the textbook monopoly model. Instead, observed properties of big tech firms like increasing returns to adoption, network externalities, and tipping effects hint at the superiority of a distinct economic model of competition under uncertainty.

Structuralism as a Pamphlet (On the Book by E. Reinert “How Rich CountriesGot Rich... And Why Poor Countries Stay Poor”. 2nd ed.)

2014 ◽  
pp. 147-153
Author(s):  
P. Orekhovsky
Keyword(s):  
Economic Theory ◽  
Economic Development ◽  
Structural Analysis ◽  
Increasing Returns ◽  
The Other ◽  
Static Theory ◽  
Poor Countries ◽  
Historical School ◽  
Socio Economic Development ◽  
The Relationship

The review outlines the connection between E. Reinert’s book and the tradition of structural analysis. The latter allows for the heterogeneity of industries and sectors of the economy, as well as for the effects of increasing and decreasing returns. Unlike the static theory of international trade inherited from the Ricardian analysis of comparative advantage, this approach helps identify the relationship between trade, production, income and population growth. Reinert rehabilitates the “other canon” of economic theory associated with the mercantilist tradition, F. Liszt and the German historical school, as well as a reconside ration of A. Marshall’s analysis of increasing returns. Empirical illustrations given in the book reveal clear parallels with the path of Russian socio-economic development in the last twenty years.

Intra-industry and inter-industry trade through the lens of comparative and absolute advantage

2016 ◽  
pp. 112-128
Author(s):  
A. Gnidchenko
Keyword(s):  
International Trade ◽  
Product Quality ◽  
Vital Role ◽  
Increasing Returns ◽  
Traditional View ◽  
Export Diversification ◽  
Industry Trade ◽  
Long Time ◽  
Absolute Advantage

The article surveys the literature that emphasizes the importance of comparative and absolute advantages for intra- and inter-industry trade. Two conclusions follow form the survey. First, unlike the traditional view, intra-industry trade is determined rather by technology than by increasing returns. Second, absolute advantages that have been ignored in international trade models for a long time play a vital role through their linkages with product quality and export diversification. We also discuss a new strand of literature that models international trade with the assumption of non-homothetic preferences.

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