The term natural monopoly keeps cropping up, seemingly with a definition other than the one I'm familiar with.
What does the natural adjective mean, the way you use it here?
What does the natural adjective mean, the way you use it here?
If social networking were a natural monopoly, could a startup really stand a chance?
I feel the fast pace of innovation and customer behavior shifts makes these products very different from oil and railroads.
[1] https://www.theverge.com/2017/5/3/15537000/whatsapp-stories-...
I prefer the more standard definition where a market that naturally tends to monopoly is one where a multi-company state is less efficient than a single company state.
In social networking, despite the power of network effects, having multiple companies is still efficient simply because people want to compartmentalize their networks of friends and interests. People want to use WhatsApp to talk to group A, and Skype to group B.
There's a tendency to assume that since phones were a monopoly, and mail is a monopoly, then all communication and social interaction aides must be naturally monopolies too, but that's not the case. Phones and mail were monopolies due to physical efficiency, not due to the desires of consumers.
>> natural monopoly for search
Google has most of the search users, creating better data for improving its product (ad targeting and search), so it gets all of the ad budget for search. Data+ad revenue suffocates the competition of users and revenue creating a natural monopoly.
A natural monopoly in an area arises from the dynamics of the business itself, other monopolies require external forces to prop them up.
This can occur through a number of dynamics, generally attributed to economies of scale, though network effects also come into play.
I'm exploring the idea that monopolies (natural or otherwise) are almost always strongly tied to network phenomena (not just in a physical sense), and are largely synonymous with the concept of economic rent.
There are a number of elements which accompany monopoly status, only some of which are strictly economic. Many of the others involve overt political or other power.