Software markets obey economic laws that would be unrecognizable to Adam Smith. Zero marginal cost distribution, cross-side network effects, data feedback loops, and API-mediated ecosystems create market structures where classical supply-and-demand intuition breaks down entirely. This series examines the structural forces that govern platform competition — from switching cost engineering and bundling economics to the data network effects that compound into durable moats. If you are building, investing in, or competing against a platform business, these are the dynamics that will determine the outcome.
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In digital markets, the marginal cost of adding one more product to a bundle is zero. Conventional wisdom says bundle everything. The data says the opposite — past a threshold, each addition dilutes the bundle's perceived value and total willingness to pay drops.