Market Structure's Characteristics And Welfare Effects Of Internet Industry

After more than 20 years of commercial development in China,the Internet industry has emerged some large Internet platform enterprise represented by Baidu,Alibaba and Tencent(referred to as BAT).The maturity of platform enterprises is becoming the most important form of the Internet industry.These enterprises have great advantages in terms of user base,profitability and other aspects,resulting in a high concentration of market shares in their respective fields and form almost monopolistic market structure.According to the traditional economic theory,the monopoly has the negative impact of undermining the efficiency of resource allocation,reducing social welfare and inhibiting innovation.Therefore,the antitrust calls of the internet industry are on the rise.However,it is undeniable that the Internet economy has experienced a long period of prosperity in China and brought about high economic benefits.This is closely related to the cautious intervention attitude of government.At the same time,from an economic point of view,monopolies of Internet platform businesses show some new characteristics.For instance,the number of enterprises in the industry is on the rise,indicating that market barriers have not yet been raised and competition remains active,also,platform companies generally implement free strategies for consumers,indicating that there is no obvious loss of consumer surplus.From this it can be seen that the monopoly structure formed by Internet platform enterprises will cause doubt on the negative effects in the traditional economic theory.This not only formed a barrier to the choice the business model and the healthy development of the industry,but also affected the economic basis of antitrust regulation.To solve these problems,we start from two aspects.First of all,it is necessary to clarify the the market structure's characteristics of the Internet industry and put forward a theory that can describe the market structure of the Internet industry accurately.Second,we need to discuss the effects of this market structure in the industry,specifically,including the following four main elements.First of all,sort out the stylized fact of the market structure of the internet industry.In this paper,we first measure the market concentration of the industry according to the traditional method and find that the industry does have an almost monopolistic or oligopolistic market structure.However,we also find that the industry also has obvious competitive characteristics.Some researches show that the number of enterprises in the industry continues to increase,indicating that the monopoly of large Internet platform enterprises does not form obvious market barriers.Enterprises of different sizes compete with each other on differentiated businesses,resulting in the industry still maintaining a high degree of competition.These characteristics show that the Internet industry can not be explained by the existing market structure theory and needs theoretical innovation.After analyzing the behavioral characteristics of all kinds of enterprises in the industry,we put forward the hypotheses about the Internet industry's market structure based on the actual development: the market structure of the Internet industry presents a structure in which monopolies and competition coexist in a hierarchical structure.Secondly,put forward the market structure of Internet industry-hierarchical monopoly competition structure.This article starts with the behavior of Internet platform enterprises on different scales and uses evolutionary game theory to analyze the formation mechanism and performance characteristics of the market structure in the industry.The results show that the market structure of Internet industry presents hierarchical monopoly competition structure,Among them,the monopoly is dominated by the main business of large platform enterprises,the competition layer is formed by the derivative businesses of small and medium-sized platform enterprises,the high liquidity of small and medium-sized Internet platform enterprises in and out of the market,together with the relative stability of large-scale Internet platform monopoly status,formed the industry-specific hierarchical monopoly and competition market structure,and pointed out that the key lies in the hierarchical is user size and business differences.This paper also verifies that the hierarchical monopolistic competition structure is a stable structure,and is verified by numerical simula.This structure is different from the existing research such as oligopoly and competitive monopoly,which can describe the market structure of Internet industry more accurately.Thirdly,analyze the changes of social welfare under the hierarchical monopoly competition market structur.Then this paper considers what impact this market structure will have.The size of the monopoly welfare loss can reflect the residual loss of consumers and manufacturers caused by the deviation of the industry from the competitive market,and can also reflect the social costs due to the failure of the market to operate effectively,also,it help to understand the monopoly correctly.Therefore,this paper analyzes the impact of hierarchical monopoly competition structure on welfare.Since monopoly and competition have different impact on social welfare,this paper analyzes the welfare in monopoly and competition separately.The main conclusions are as follows: As the Internet industry has the characteristics of diversified needs and network externalities,even monopoly is stable in the industry,it improves consumer surplus to a certain extent.From the perspective of differentiated competition,the user base of large-scale platform enterprises will concentrate the surplus in the industry and so on.However,this difference is not the result of large-scale platform companies deliberately suppressing medium and small-sized platform enterprises.Fourthly,we test the changes of social welfare in Internet industry.Based on the theoretical analysis of welfare changes,this paper selects the appropriate indicator-the premium rate of market power to test the welfare changes of the industry.Using the New Empirical Industrial Organization theory to establish the model,measured the premium of the market power in the major areas of the Internet such as e-commerce,live service and Social Networking Site.The calculation results show that the market power in the Internet industry is low,indicating that the industry maintains a strong competitive vitality and validates the previous theoretical analysis on welfare changes.Finally,this article gives some suggestions on the antitrust regulation of the Internet industry,including: change their way of thinking and return to the original intention of antitrust;setting up the antitrust examine standard that adapts to the internet industry;to protect the overall welfare level of the industry as an important goal;guard against data monopoly;the focus of regulation is shifted from the overall regulation of the industry to case-based or behavioral guidance.The theory of hierarchical monopoly competition structure proposed in this paper enriches the theory of market structure and can well describe and explain the market structure of internet industry.Analyzing the welfare changes under such a structure and clarify the impact caused by the market structure of the industry.This part of the research can provide a theoretical basis for the governance of the large-scale Internet platform enterprises and clarify the misunderstandings in the antitrust regulation of the Internet industry.