Returns to scale

Under positive feedback effects ( increasing returns, returns to scale ) are in the economy three effects, which favor the formation of (temporary) monopolies. These include:

• Economies of scale through increasing returns to scale decrease unit costs, which in turn provides the ability to cut prices faster than competitors can do this. This increases the market share.
• Network effects: Do the benefits of a good depends on how many players use it, it is called network effects, especially if it is not just a single good, but a class of complementary and compatible goods. A high number of offered components attractiveness to other providers, which in turn increases the attractiveness for the customer increases.
• Switching costs and lock-in effects: Since the integration of systems costs for acquisition and training arise, a client is bound to a corresponding system. The change to a different system is thus expensive and is unlikely to rise the switching costs, and customer loyalty to the system is stronger. The consequence of increasing switching costs is the lock-in effect.

Of the above-mentioned effects of trade is particularly concerned with digital goods. The three effects in turn imply each other, and lead to an actor with a dominant market share is still dominant ( Increasing returns are the tendency for That Which is ahead to get Further ahead, and For Which looses advantage to loose Further advantage ).

• Business Administration