Market Structure Transformation of Network Economic System: From Theory to Application

Abstract

Against the backdrop of widespread networks in the modern world, this paper aims to study the transformation of network economic system in general and its market structure in specific. It is organized in the mode of "concept introduction-model setup-empirical study". Starting from the concept of "network effects", it is then extended to a simplified model of market structure and the empirical test of global web server market. It is proved theoretically and empirically, that the natural market structure in network economic system tends to be more concentrated and monopolistic, which can hardly be explained merely by misconducts of market players as the conventional wisdom suggested.