Abstract:

We consider the mechanism of the winner-take-all phenomenon in markets in which network externality does not work. The development of information networks has led to the appearance of new economies referred to as "digital economies", in which a winner-take-all phenomenon is observed as a feature. This phenomenon can be explained in terms of network externality, lock-in, and path dependency. We give examples of markets in which this phenomenon is observed, including the OS market and the cellular-phone market. However, a winner-take-all phenomenon is also observed in markets in which the economic laws of a digital economy do not work. To date, no model explaining this phenomenon has been reported. Thus, to observe the features of this phenomenon, we develop a multi-agent model of communications and consumer behavior, and with it simulate the market phenomenon.In our analysis, we make a clear distinction between Winner-Take-All and Lock-In. That is, Lock-In is one of the factors which produces Winner-Take-All. The term 'Lock-in' is used to refer to a situation in which the cost of converting from specific technologies or goods to other factors is so high as to be nearly impossible. Lock-In exists on individual, organization, and market bases. Winner-Take-All is a phenomenon under which the Lock-In phenomenon advances, involving consumers who are still "locked in". We define the factors which produce the Winner-Take-All and Lock-In phenomena as "Winner-Take-All" and "Lock-In" drivers.Various factors have contributed to the rise of the "Winner-Take-All" phenomenon. One typical such factor is network externality. A number of other factors can also be considered.. We researched the Winner-Take-All phenomenon in several markets, including the mobile telephone, fast-food and music markets, and observed the phenomenon in all of them. Applying traditional economic laws enabled us to understand the mobile phone and fast foods markets, but not the music market. Consequently, we need to develop a model that will enable us to more clearly understand the Winner-Take-All mechanism in markets where network externality is ineffective.

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proceedings file (PDF file)(4 pages / English)