Zero Marginal Cost

References

(Rifkin, 2014) ⇒ J. Rifkin. (2014). “The Zero Marginal Cost Society: The Internet of Things, the Collaborative Commons, and the Eclipse of Capitalism." Palgrave Macmillan. ISBN:1137278463
- QUOTE: The plummeting of marginal costs is spawning a hybrid economy - part capitalist market and part Collaborative Commons - with far reaching implications for society, according to Rifkin. Hundreds of millions of people are already transferring parts of their economic lives to the global Collaborative Commons. Prosumers are plugging into the fledgling IoT and making and sharing their own information, entertainment, green energy, and 3D-printed products at near zero marginal cost. They are also sharing cars, homes, clothes and other items via social media sites, rentals, redistribution clubs, and cooperatives at low or near zero marginal cost. Students are enrolling in free massive open online courses (MOOCs) that operate at near zero marginal cost.

(Bakos, 1998) ⇒ Yannis Bakos. (1998). “The Emerging Role of Electronic Marketplaces on the Internet.” In: Communications of the ACM Journal, 41(8). doi:10.1145/280324.280330
- QUOTE: The ability of Internet marketplaces to reduce search costs for price and product information may significantly affect competition. Bakos [4, 5] shows that lower buyer search costs in electronic marketplaces promote price competition among sellers. This effect will be most dramatic in commodity markets, where intensive price competition can eliminate all seller profits. It will also be significant in markets where products are differentiated, reducing the monopoly power enjoyed by sellers, and leading to lower prices and seller profits. Figure 3 shows the equilibrium prices for a differentiated good with zero marginal cost, which consumers value at [math]\displaystyle{ r }[/math] and has a degree of differentiation [math]\displaystyle{ t }[/math]. As search costs fall from very high to moderate, new markets emerge, and both sellers and buyers benefit. However, if search costs continue to fall, sellers are made worse off since buyers can more easily find the lowest-cost seller, while buyers benefit from the lower prices and their improved ability to find products that fit their needs.