Question

2. Traditionally, monopolies are harmful because they lead to higher prices for consumers. However, using Google for search is free. Are there any potential harmful effects of Google’s significant market power?

Answer 1

Google has market control since Google leaves us with the digital equivalent of six left turns, two lane changes and a dirt road path. The European Union argues that Android and its search engine provide a preferential position for Google, which it uses to offer its own app store and services. That's not much different from how my local gas station or your coffee shop is using their specific locations as a means of market control.

Because of this market control, Google is able to charge a price similar to the average price its consumers can pay for their services, reducing demand surpluses. But future market surplus loss due to a lack of competition is maybe even more expensive. A firm like Google, with its privileged position, has far less opportunities to develop and expand its product selection

An organization with market power can also limit other firms' innovation. The existence of your coffee shop in a particular location means that you can not find another company in the same location, which will potentially provide you with more customer surplus. With Google having a dominant "position" over the Internet, the same position can not be filled by other creative companies that might have offered even better services.

The argument here is not that today's tech giants are unable to act in anticompetitively or to hurt consumer welfare. Even with the cacophony of warfare to these companies, policymakers and regulators must be aware of the need to correctly identify markets, acknowledge that one-company supremacy does not have to be tantamount to harm to customers, and realize that there is little empirical evidence for economically deterministic forecasts of lasting monopolies.