Positive feedback effects
In the economy, positive feedback effects ( increasing returns , returns to scale ) mean three effects that favor the formation of (temporary) monopolies . These include:
- Economies of scale : Increasing returns to scale reduce unit costs, which in turn offers the possibility of lowering prices faster than competitors can do. This increases the market share.
- Network effects : If the usefulness of a good depends on how many actors use it, one speaks of network effects, especially when it is not just a single good but a class of complementary and compatible goods. A high number of components offered increases the attractiveness for other providers, which in turn increases the attractiveness for the customer.
- Switching costs or lock-in effects: Since the integration of systems results in costs for acquisition and training, a customer is bound to a corresponding system. Switching to a different system is therefore expensive and less likely, the switching costs increase, and the customer's loyalty to the system increases. The result of rising switching costs is the lock-in effect.
The trade in digital goods is particularly affected by the effects mentioned above . The three effects are in turn mutually dependent and lead to an actor with a dominant market share becoming even more dominant ( Increasing returns are the tendency for that which is ahead to get further ahead, and for which loses advantage to lose further advantage ).
Individual evidence
- ^ W. Brian Arthur: Increasing Returns and the New World of Business /