question archive Identify a firm that you believe may have a significant amount of market power
Subject:MarketingPrice:2.88 Bought18
Identify a firm that you believe may have a significant amount of market power. What are potential sources of entry deterrence that preserve that market power?
Facebook is an excellent example of a firm with a significant amount of market power. Facebook has over a billion users and makes billions from advertising. The firm has a lot of market power because it draws so many eyes compared to other social media sites that it has more say over the price it charges.
The main source of entry deterrence is that Facebook is a network monopoly. This means that Facebook benefits from being the largest social media website because new entrants to social media will likely go to it to interact with their friends. To see how powerful this is, let's look at an example.
Assuming a firm comes along and produces by far the best social media site ever designed. It has every feature you could want and is just a superior product to Facebook in such terms. People will still not go to this new social media site because their friends aren't on it. Their friends are on Facebook, and those friends are thinking in the same way. People tend to cluster on a few social media sites because you need interaction for utility.