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Tag Archives: natural social monopolies

Natural social monopolies

Posted on January 29, 2018 by lawofmarkets
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This is the definition of a Natural Monopoly, which is a category of industry structure that has long existed within economics.

A natural monopoly is a monopoly in an industry in which high infrastructural costs and other barriers to entry relative to the size of the market give the largest supplier in an industry, often the first supplier in a market, an overwhelming advantage over potential competitors.

But in the case of some industry, especially among social media, there is another form of monopoly which I call a Natural Social Monopoly. What allows various forms of social infrastructure to become monopolies is that by their very structure, there can only be one producer in the industry since the aim is to connect everyone who wishes to link up using the network that has been created. If there is more than one producer, and the producers are not linked, then those who join one cannot communicate with members of the other which defeats the entire purpose of the network.

As there cannot be more than one, there need to be regulatory rules that ensure that no one who wishes to participate in such networks can be removed by the provider unless some pre-existing law is being broken. These rules are necessary to promote free speech since the monopolist must be unable to arbitrarily decide who is allowed to enter the network and who is not. Facebook, twitter and other such forms of social-media networks must have restrictions put on them to limit the restrictions they can place on participants.

In this case the aim is not to limit the level of prices, which is the nature of natural monopolies, but to extend the use of these facilities as widely as possible. It is therefore not in relation to price that these restrictions should be introduced but in relation to the other dimension of a supply and demand curve, the volume of participants. If it is to be provided as a free good, then it must be free to all who wish to participate in the network.

So far as I can tell no one has ever discussed this problem before, since monopolies have until now have only been considered in relation to restrictions by limiting supply in order to raise the price charged to users, while social media are forms of monopoly in which the aim is to expand supply at an effective price of zero with the intention of increasing the level of demand to the largest possible extent.

Posted in Cultural, Economic theory and policy, Philosophical and speculative | Tagged natural social monopolies | Leave a reply

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