Digitalization of the Global Economy: Monopolies, Personalized Prices and Fake Valuations

Market power of local suppliers is reduced

The danger of digital monopolies is growing

  • The construction of networks is associated with very high initial costs. The same applies to the development of operating systems and application software. However, the reproduction and delivery of a computer program is often done via a download (like with music) and has a marginal cost close to zero. As a result, the company that offers the greatest quantity has the lowest unit costs and can demand the lowest price. Long-term, only a few or even just one supplier can survive in the market.
  • Digital platforms often have a network characteristic. The more participants in a social network or an online file-sharing platform, the more attractive it is for people to join the correspondingly large network. In the end, the company that has the most participants prevails (“Winner takes all” phenomenon).

Market transparency is increased

New information asymmetries arise

Consumers do not know the value of their data

Fake ratings lead to wrong consumer decisions

  • Companies can commission customers or service providers to evaluate their services as better than they are.
  • Companies have an interest in negative ratings for competitors and can pay third parties to give negative reviews.

Conclusion and outlook

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Our mission on this blog is to shed light on Europe’s role in the world economy. https://globaleurope.eu/

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Global & European Dynamics

Global & European Dynamics

Our mission on this blog is to shed light on Europe’s role in the world economy. https://globaleurope.eu/

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