When are winner-take-all markets good for consumers?
A) When monopoly costs exceed the value of network externality returns
B) When monopoly costs exceed the value of technological utility
C) When the monopoly cost curve is extremely steep
D) When the value of technology utility and network externality returns exceeds monopoly costs

Question

Quizplus · Accepted Answer

Winner-take-all markets can be good for consumers when the value of technology utility and network externality returns exceeds monopoly costs. In such a scenario, a single dominant player in the market is able to provide significant benefits to consumers in the form of improved technology and compatibility with a large user base. This creates a network effect, where the more people use the product, the more valuable it becomes to each individual user. As a result, consumers might be willing to pay higher prices or accept lower-quality products in order to benefit from these network effects. In turn, the dominant firm enjoys high profits, which incentivizes further investment in improving the technology and expanding the user base. However, this scenario is only beneficial if the monopoly costs (such as price gouging or reduced innovation) do not outweigh the benefits of network effects and technological utility for consumers.

When Are Winner-Take-All Markets Good for Consumers