Over on Economic Humanities, another necessarily bonkers foray into economic sociology, trying to develop the notion of shallow markets. Inspired in the first place by trying to capture what is distinctive about the market structures of platform capitalism (Uber, Airbnb, the "sharing" economy, etc.), but in a way which can also be used to refine our understanding of "traditional" market structures.
Glancing over it now, I'm less confident about the centrality of negative externalities. Perhaps what I'm really interested in here is the old notion of a producer entering a market in expectation of profit, and leaving a market in response to losses. In this context, are there differences between platforms and markets? Platforms are designed to easily assimilate productive capital which was recently used for some other purpose, but is that really lowering barriers to entry, or is it cultivating a spectrum of market presence, where producers are neither completely in nor completely out of the market, but ghosts with a transparency slider, 0% to 100%? What is the status of a seller who has developed a good reputation profile, and still has all the productive capital necessary to compete on a particular platform, but just isn't bidding and/or checking that particular inbox any more? Have they exited the market or not? What if they start checking more frequently after a few months? Should this change the way we think about sunk costs / transitional costs / stranded costs?
Partly what I'm trying to capture is what these relatively new modes of provisional and flexible market participation mean for competition as it is traditionally conceived in mainstream economics. Okay, yes, platform capitalism has discovered devious new ways of continuing neoliberal trends of casualization and deregulation. But also: many of these markets are not only de facto extremely exploitative, they are also uncompetitive or only ambiguously competitive.
It is true that producers encounter pressure to improve the quality and cost of their offering, in ways which are favorable to the consumer. But other features of competition are not present. The relative ease with which producers may defer or offload costs, and may come and go from the market, means that the market does not cultivate technical innovation, robust structures of intangible capital, nor real growth. Instead of facing pressure to improve productivity, producers face pressure to begin their "going out of business, everything must go, big bargain sale" from the moment they enter the market.
(Some of these incentive dynamics may be obscured, at the moment, by the institutionally and culturally originated waves of innovation (and innovation marketing and rhetoric) which are a compulsory feature of any tech company's existence. The provisional, one-foot-in-and-one-foot-out quality of these microentrepreneur markets may also not entirely hold true in the case of flagship platforms like Uber and Airbnb, since there's a big physical capital investment involved: the situation of some Uber drivers if it were to continue would verge on indentured slavery. TaskRabbit et al. are slightly more clear-cut examples).
Perhaps an interesting model to play with would be a market in which all firms are loss-making, average total cost is greater than price, but marginal variable cost is less than price per unit. Barriers to entry are not low but negative.
(You could perhaps get clever and explain these negative barriers in terms of a kind of "grass is greener" epistemology of capital asset valuation. New producers do not literally have a monetary incentive to enter; they have a sort of accounting incentive to enter, in that by switching their underperforming capital, its value rises on the basis of anticipated returns. But underperformance is the rule across all platforms. The producer's incentive to enter a market is their own capital, which appears constantly undervalued in whatever market it is participating in, and overvalued in whatever markets it's not).