In industries in which strong network effects exist, which industry structure is likely to emerge?
A) perfect competition
B) monopoly
C) monopolistic competition
D) oligopoly

Question

Quizplus · Accepted Answer

Strong network effects typically lead to the emergence of an oligopoly in which a few large firms dominate the market. This is because users are more likely to join a network that already has a large user base, creating a "winner takes all" effect. As a result, it becomes difficult for new players to enter the market and compete with the established firms. This leads to a market structure in which a few dominant firms capture the majority of the market share.

In Industries in Which Strong Network Effects Exist, Which Industry