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The Three Trends: Granularity, Behemoths and Cooperation

Organization restructuring in the network economy is about the unbundling of products and services, both at the production and consumption end, leading to granularity and direct buyer-seller interaction, eliminating intermediaries.

Abstract The first trend, OR, has redefined markets and unbundled products, transforming economic units into granular structures which operate with fewer employees and intermediaries. Connections and data allow buyers and sellers to confront each other directly and transactional integrity is maintained by the pillars of social capital - trust, reputation, responsibility and rights. Agency costs of monitoring and incentivizing workers are lower due to disintermediation. The second trend is an agglomeration of transactions. This trend, enabled by network effects and the trading of attention across multi-sided markets, results in the concentration of economic activity around a few major hubs, the OB. Advertising emerges as a major player in these multi-sided markets. The third trend is a recalibration of the notion of competition.

Keywords Multi-sided markets • Unbundling of consumption • Trust and reputation • US Census data • Economies of scale

In a network economy, economic transactions are characterized by the links between nodes, which represent market participants. The network is

© The Author(s) 2017 29

S. Bhatt, How Digital Communication Technology Shapes Markets,

Palgrave Advances in the Economics of Innovation and Technology,

DOI 10.1007/978-3-319-47250-8_3

the market and in a competitive market, prices provide the incentives and information for supply and demand to adapt toward an equilibrium. In this chapter we analyze three developments emanating from connectivity and the vast information resources provided by the Internet: the diminished role played by intermediaries in the network economy; the simultaneous presence of massive organizations or behemoths; and the resolution of this paradoxical outcome by cooperation among agents.

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