Re:Compulsory Licensing of Backroom IT?
by nabla9 on Friday August 03, 2018 @08:33AM
(#17679292)
>There's no point in the word any more.
There is a point and your confusion is frequent one. Let me clarify.
When a economist like the author uses uses the word 'monopoly', it's shorthand for 'monopoly power'. It's obvious from the context of the discussion what he means. The confusion arises when people know the definition of pure monopoly (single supplier) but don't know what is monopoly power.
Between pure monopoly and perfectly functioning markets there is a large area with varying degrees of monopoly power.
There are different ways to quantify the monopoly power. One is using market power and Lerner index.
In perfect markets Lerner index would be zero. In practice it rarely is. https://en.wikipedia.org/wiki/Lerner_index
Internet economy generates large companies with monopoly power trough the network externalities. Dominating companies create barriers to entry for newcomers. If the value comes from being connected to others, the platform that connects gets most of it's value from the number of customers and economies of scale, not from being technically better. (of course, after you have the economies of scale you can hire the best people to keep up).
Classical Natural monopolies like railway systems, telephone and electric networks are often regulated to preserve markets. Platform economies have similar attributes.
There is a point and your confusion is frequent one. Let me clarify.
When a economist like the author uses uses the word 'monopoly', it's shorthand for 'monopoly power'. It's obvious from the context of the discussion what he means. The confusion arises when people know the definition of pure monopoly (single supplier) but don't know what is monopoly power.
Between pure monopoly and perfectly functioning markets there is a large area with varying degrees of monopoly power.
There are different ways to quantify the monopoly power. One is using market power and Lerner index. In perfect markets Lerner index would be zero. In practice it rarely is. https://en.wikipedia.org/wiki/Lerner_index
Internet economy generates large companies with monopoly power trough the network externalities. Dominating companies create barriers to entry for newcomers. If the value comes from being connected to others, the platform that connects gets most of it's value from the number of customers and economies of scale, not from being technically better. (of course, after you have the economies of scale you can hire the best people to keep up).
Classical Natural monopolies like railway systems, telephone and electric networks are often regulated to preserve markets. Platform economies have similar attributes.