Market Dominance in the Digital Age
66 Pages Posted: 6 Oct 2020 Last revised: 27 Sep 2023
Date Written: September 26, 2023
I document that the network structure of the online economy significantly contributes to rising industry concentration. Firms that are central in the online economy benefit more from increased economies of scale and network effects resulting from digitalization. Industries with firms that are more central become more concentrated and central firms have larger increases in market share. These results are driven by firms’ ability to generate revenue, as evidenced by central firms earning higher risk-adjusted returns and having more positive earnings surprises. Finally, centrality is more strongly associated with increasing productivity than increasing markups, providing generally positive welfare implications.
Keywords: Industry Concentration, Internet, Network, Digitalization
JEL Classification: D22, E22, G32, O33, L1, L86
Suggested Citation: Suggested Citation