Digital platforms force a rethink in competition theory
Economists need to provide regulators with tools to deal with market concentration

Diane Coyle
professor of economics at the University of Manchester

August 17, 2017


Anxiety about the health of competition in the US economy — and elsewhere — is growing. The concern may be well founded but taking forceful action will require economists to provide some practical ways of proving and measuring the harm caused by increasing market power in the digital economy.

The forces driving concentration do not affect the US alone. In all digital markets, the cost structure of high upfront costs and low additional or marginal costs means there are large economies of scale. The broad impact of digital technology has been to increase the scope of the markets many businesses can hope to reach.

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