Changes in market structure

I believe one of the most important and general conclusions I reached reading partially Media Economics and The Wealth of Networks, and The Long Tail is that the changes brought by Internet are not superficial, but economically very profound. The new information technologies are moving market structures to another direction, after decades being anchored in the same model.

I found the explanation of four different market structures in chapter seven of Media Economics interesting: perfect competition, monopolistic competition, oligopoly, and monopoly. This order is from the most to the least competitive markets. The digital revolution, studied in the three books, is causing a decrease in market share concentration in some economic sectors, especially those related to information. If media markets are becoming more competitive, media conglomerates are becoming less powerful.

The barriers to entry in these markets are decreasing, since almost everyone has access to the new production tools. Chris Anderson wrote in The Long Tail that the XXI century is about an economy of abundance, opposing the past century and the economy of scarcity. Another barrier to entry that has been getting weaker is copyrights. The ease of distribution of information enhanced by Internet makes knowledge more available and leads more people to produce and share knowledge. Yochai Benkler spends a great part of his book discussing the open-source benefits and using successful examples as an incentive, such as Linux and Wikipedia.

On another topic, I found an article published by The Economist regarding Anderson’s long tail and citations in academic papers. It summarized research concluding that as more as journals become available online fewer articles are being cited in the reference lists of the papers.

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2 Responses to Changes in market structure

  1. kegill says:

    That’s an odd finding (The Economist article). Thanks for the link … I’m behind in reading my magazines!

    One more reminder that we are living in an era of disruption. With about five firms controlling about 90-95% of what we read, hear or see … we’re not going to break those barriers overnight!

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