Diminishing Returns

Definition:

Diminishing returns refers to the notion that the return that a company receives for additional effort decreases as the number of units / output increases. This is typical of industrial goods, but is in contrast to the phenomena of network effects and increasing returns for digital goods. Diminishing returns explains why industrial companies become more ineffecient once they grow over a certain size. Thus firms do not compete as effectively when in a large monopolistic market than they do in an oligopolistic market (car company for example) assuming the size of the market is over the scale limit that traditional firms can operate efficiently. With the "winner takes all" behavior of digital goods, markets can be more efficient when one company supplies the entire marketplace, especially if the market is governed by proprietary standards versus open standards.

Related terms:

Hedges protect

Useful articles:

»	What to Do When People Want Everything for Free
»	Essential Software
»	The Thinker Leadership Style
»	Increase Internet Sales with Free Trials

Tax Calculator

This calculator will help you to calculate the before and after tax prices for purchases

Net Worth

This calculator will help you to determine your assets and liablilities and your Net Worth

Car payments

This calculator estimates your monthly payments on an auto loan

Browse by categories

Accounting	Advertising	Banking
Bankruptcy	E-Commerce	Economics
Finance	Law	Investment
Insurance	Marketing	Real estate
Statistic	Trade	Purchasing

Featured Articles:

Marketing

Value in the Sales Call

What if selling was about providing real value to the prospect in the sales call?

Selling is just asking for the order.

What would it take to get you into this ... [ more... ]

Management

Five Ways To Sabotage Your Business

Believe it or not, there are many, many ways to sabotage your business. And, chances are, your staff is doing some of these now, without your even knowing it. And worse yet, you've probably even he... [ more... ]

Motivation

How Do You Get And Keep Enthusiasm?

Getting enthusiasm is a little like learning to breathe: Nobody can tell you exactly how to do it, but without it you're in big trouble. No one but you can discover that compelling purpose or excit... [ more... ]