Network Competition as Determinant of Contemporary Markets Configuration

325
DOI: 10.20542/0131-2227-2016-60-4-13-20

N. Rozanova, National Research University Higher School of Economics, 31, Shabolovka Str., Moscow, 119049, Russian Federation (nrozanova@hse.ru

Abstract. The latest phenomena in the area of industrial economics have turned out to be beyond the traditional models of industrial organization theory. This theory deals with the four basic market structures, namely that of free competition, monopolistic competition, oligopoly and monopoly, with a common evolutionary pattern from competition to monopoly. However, contemporary technological competition has engendered a brand-new type of market structure. Some key features of it are outlined in the article with the stress on contemporary trends in network market development that have arisen under the influence of digitalization. The traditional approach to network market is through escalation effect, when network spillovers exist either in technology or in demand, and companies or IT platforms should gain a benchmark mass of clients, as fast as possible, in order to have the whole market. All other consumers have tendency to buy the leader’s product; thus, the market becomes a natural monopoly of the leader (at least, natural oligopoly). With the advancement in ICT technology, especially with digitalization, a new configuration of network market structure is being developed. Niche players are gaining their positions. It is arisen a multiple offer of ICT products. Market is becoming more and more fragmented. Network products evolve from substitutes into complements. The market drives from natural monopoly (oligopoly) into a very competitive structure. The author examines the mechanisms and results of network market transformation in contemporary digital era. Unlike the previous period when network services were provided separately, the newest tendencies, starting from TV, demonstrate that the frontiers among network markets become blurred, the separation between markets and particular ICT products vanishes/ So far, the formerly independent network markets are being transformed into shapeless segments of a single and indivisible multimedia area. In this integrated area any ICT provider obtains an opportunity to successfully compete with any other. The differences between various electronic devices, between ICT, broadcasting and address services, and even non-ICT products disappear. Network market evolves from a very concentrated and monopolized structure into a fragmented competitive industry with tough price competition. This brand new structure could be titled as concentric (ring) market, or a center-periphery model. The relationships within it mean unknown possibilities and challenges both for market participants and governments. 

Keywords: industrial organization, industrial economics, network market, network competition, market structures 


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For citation:
Rozanova N. Network Competition as Determinant of Contemporary Markets Configuration. World Eonomy and International Relations, 2016, vol. 60, no. 4, pp. 13-20. https://doi.org/10.20542/0131-2227-2016-60-4-13-20



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