- Technological change has the ability to change some of the characteristics traditionally found in certain market structures
Diagram: How Technology Influences Market Structures
Technology can lower barriers to entry and increase the level of competition in an industry
Technology can reduce barriers to entry
- Small businesses may be able to enter markets that are normally dominated by larger firms
- E.g. A jewellery maker can set up shop on Etsy and showcase their designs to a large market
Technology can reduce information asymmetry
- Web technologies can harness, analyse, interpret and present large amounts of information quickly
- Information on pricing and products is much more easily available
- E.g Skyscanner, Google Shopping, and PriceRunner allow consumers to compare prices and see reviews
Technology can increase competition
- As more firms can access e-commerce platforms, digital marketing, and online marketplaces, which increases access to larger markets
- E.g Airbnb's online marketplace connects local hosts with customers from around the world
Technology can increase market power
- This can result in the formation of more oligopolies or monopolies
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- E.g Technology giants Google and Amazon have gained significant dominance due to factors such as brand loyalty and economies of scale, making it difficult for smaller competitors to enter the market