2.11.7 (HL)—Advantages and risks of market power

Market power can fund innovation but also create allocative loss.

The same barrier that supports research or network investment may let a firm restrict output, raise price or weaken consumer choice.

Example

A software platform may use profits to improve security while its closed ecosystem raises switching costs for users.

Evaluate both the dynamic benefit and the static cost, specifying who gains, over what time horizon and under which evidence.

There is no automatic sign for welfare: innovation claims need evidence, and deadweight loss is not the only criterion.