US Justice Department Investigates Serious Tech Competition Issues
Link: https://finance.yahoo.com/news/justice-department-no-2-cites-170720393.html
The article explains the US Justice Department’s concerns regarding the competitive environment of big technology firms such as Facebook or Google, and how they are investigating the situation. While US officials are concerned about the monopolization of these industries and unfair competition, the tech giants argue they face stiff competition. The Deputy Attorney General Jeffrey Rosen compared this situation to the film industry in the 20th century, which was subject to many antitrust regulations. He also mentioned that there are “serious and substantive issues” in the industry and that having a monopoly is detriment to customers.
Most U.S. officials are not considering the information cascades and network effects that take place when individuals choose which tech platform to use. As discussed in class, users are benefited with direct network effects when joining a platform where all his/her friends and family are present. The benefits of network effects are exponential; therefore, the more users in the platforms, the more market share these tech giants will enjoy. Since a larger user base adds value to each customer using the product, the deputy general is wrong by thinking this phenomenon is detrimental to customers. While the benefits of network effects are more substantial in this situation, user base numbers also increase due to information cascade principles. If most of a user’s friends and family are using a platform, the user might reject his personal opinion regarding which platform to use and join the more popular platform. This happens because the user believes his/her friends and family’s combined opinion is more valuable than his/her opinion.