Monopolies Stifle Innovation, Hurting Consumers and Businesses
The study looked at how the structure of companies affects their motivation to improve their products. When there is one big supplier and two similar smaller companies, the big one tends to set different prices for each of the smaller ones. This pricing strategy hinders the smaller companies from making their products better when they are separate. However, if the big supplier and one of the smaller companies work together, upgrading the product of the smaller company can slow down the innovation process of the bigger company. On the other hand, when the big supplier enhances its product, this can speed up the innovation of the smaller company. Overall, when the big supplier and a smaller company collaborate, it helps the small company improve their products faster, while the big supplier's progress might slow down a bit.