In the digital economy there is a tendency towards market concentration through what is known as the “network effect”. People join Facebook because most of their friends are there, making competition difficult and driving the market towards concentration.
The network effect also drives businesses towards “blitscaling”, where losses are subsidised with investors money in order to grow the market share.
The dilemma for platform cooperatives is the following:
1. The cooperative model is better suited for monopolies and monopsonies than shareholder businesses.
2. The cooperative model is less suitable than a shareholder business at growing market share while making a loss, as it is difficult to have outside investors subsidise the initial losses.