The Web Might Be a Monopolist’s Best Friend
The internet makes market concentration easier, and no one is sure what to do about it.
What’s an antitrust regulator to do?
Photographer: Jacques Demarthon/AFP/Getty ImagesLots of pundits and policy makers have concluded that monopoly power is a huge economic problem resulting from government influence, digital network effects or the natural tendencies of the capitalist system.
Some economists, however, have urged caution. It’s possible, they argue, that big dominant companies gain market share not because the system is rigged or unstable but because some companies are simply a lot more productive than others. If those companies are more profitable, this story goes, it’s because they put out better products or find clever ways to hold down costs.
There’s also a third possibility that falls somewhere between these extremes. Though economists typically only think about how technology affects productivity, it’s also possible that new technologies have altered the ways companies compete.