Facebook, Amazon and Other Tech Giants Tighten Grip on Internet Economy
by: Don Clark and Robert McMillan
Nov 06, 2015
Click here to view the full article on WSJ.com
by: Don Clark and Robert McMillan
Nov 06, 2015
Click here to view the full article on WSJ.com
TOPICS: Internet
SUMMARY: Computing hardware has long served as the critical backbone of business operations. Today, the Internet economy is powered by an infrastructure that has become virtual, and is controlled by a small handful of tech giants.
CLASSROOM APPLICATION: Students can evaluate the effect of economies of scale and network externalities (which are not mentioned in the article) on barriers to entry and ultimately the market power of the noted tech companies.
QUESTIONS:
1. (Introductory) Evaluate this statement in terms of economies of scale and barriers to entry into the relevant industries: "All of these companies are operating in industries where scale is rewarded and where there is a very high level of capital intensity required to even hope to compete," said Karl Keirstead a senior analyst with Deutsche Bank Securities.
2. (Advanced) Evaluate this statement in terms of the market power of tech firms: "These companies are delivering online search, messaging, advertising, applications, computing and storage on demand-which has positioned them not only to empower business but to extract extraordinary value as it grows." Interpret "positioned them" in terms of economies of scale and barriers to entry.
3. (Advanced) Define "natural monopoly" and "network externalities." Do economies of scale and network externalities in the noted tech industries drive barriers to entry and ultimately the market power of the established players in these industries?
1. (Introductory) Evaluate this statement in terms of economies of scale and barriers to entry into the relevant industries: "All of these companies are operating in industries where scale is rewarded and where there is a very high level of capital intensity required to even hope to compete," said Karl Keirstead a senior analyst with Deutsche Bank Securities.
2. (Advanced) Evaluate this statement in terms of the market power of tech firms: "These companies are delivering online search, messaging, advertising, applications, computing and storage on demand-which has positioned them not only to empower business but to extract extraordinary value as it grows." Interpret "positioned them" in terms of economies of scale and barriers to entry.
3. (Advanced) Define "natural monopoly" and "network externalities." Do economies of scale and network externalities in the noted tech industries drive barriers to entry and ultimately the market power of the established players in these industries?
Reviewed By: James Dearden, Lehigh University
No comments:
Post a Comment