With standard terrestrial radio there is a natural limit to the number of stations there can be in any one market. On the internet, anyone with the nous to set up a server to stream music and who can sign the contracts with the record companies can launch one or many such stations.The answer to his question is that the value of all the firms in the market will be the same, since economic profits of each of them will be (approximately) zero. Thus each firm will earn the market rate of return, that is, an amount that is just enough to keep the resources in their current use. Or, the opportunity cost of those resources. If you want to make your fortune don't enter highly competitive industries.
There’s just no limit to the number of people who can enter this space. So what actually, in a world of potentially unlimited compeition, is the value of any of the competitors?
Sunday, 19 June 2011
The value of a firm
Tim Worstall writes,