Digital Market Concentration: An Institutional and Social Cost Analysis

In this thesis, I develop an analysis of the industry concentration seen in digital markets today. I begin with a description and argument for the use of institutional economics. This framework allows for the integration of an interdisciplinary approach to economics. My analysis details the socioeconomic and political impacts, as well as the underlying market dynamics that have pushed digital markets towards concentration. I offer novel explanations for the lack of firm behavior that should theoretically increase profit, the existence of barriers to competition, and consumer behavior that focus on the role of social institutions. I also detail many of the social costs of these concentrated markets, such as their impact on democracy, power to influence social institutions, and the impact they have on concentration in other markets. This is done to show that the fears surrounding monopolies do not end with prices. Even in digital markets, where many times prices are very low, if not zero, there are reasons that monopoly is economically inefficient and socially sub-optimal. However, due to the path-dependent nature of the extreme benefits associated with digital markets, policymakers cannot reasonably propose breaking up these companies. Instead, they must use the power of the government to counteract the conglomerations of social power seen in these private companies in search of an optimal outcome.