Question

Discuss the benefits and drawbacks of the hub economy. Do you believe most people are benefiting from this type of economy or are hurt by it? Support your answer.

Answer 1

A handful of firms forming a hub and distorting traditional business . Hub economy is kind of monopolistic competition where a few firms dominate the economy through their market based advantages and gain maximum market share . A small number of firms dominate . The benefits can be accounted as economies of scale from growing consumer base , size of such firms , production advantages etc . But such hub firms disrupt traditional business by taking advantage of their market based strength and gain huge market share . This increases barriers for free market entry by other firms making these firms monopoly in their particular sector . They can use their network based market strengths to enter in new markets effectively .

People are mostly hurt by it as it deprives smaller organizations in the economy . Small number of firms taking up market power and gaining competitive advantages can be detrimental for market structure and competition . Platform businesses like Amazon , google , microsoft are few good examples .