I read this slightly differently, but I think it's the same mechanism. I wrote a fairly popular comment on it in 2017: https://news.ycombinator.com/item?id=1330

I read this slightly differently, but I think it's the same mechanism. I wrote a fairly popular comment on it in 2017: https://news.ycombinator.com/item?id=13306700 https://news.ycombinator.com/item?id=13306700 Mass markets drive down median quality through price competition, while quality products move upmarket due to loss of scale. Instead of decent quality for a decent price, you end up with abundant dirt-cheap crap, and a few high-end boutiques, if they're even in your area / available for you to order from. The text of my old comment: The hollowing out of the middle ground seems to happen in most commoditized markets. Take meat. Used to be you'd go to the butcher for your meat, and you'd get a reasonably good product, from a butcher who knew where the meat came from, probably even the farmer who reared the meat. That was the way almost everybody got their meat, so the fixed overheads of having a butcher shop was spread over a large customer base. Move along a couple of decades. Supermarkets, with their more efficient logistics, eat into the meat trade. Butcher shops almost completely disappear. But supermarket meat goes through a longer supply chain with larger suppliers that have the efficiencies of scale to cope with the pricing power supermarkets have. The butcher shops that survive turn into boutiques, where their unique selling proposition is what used to be commonplace: that they know where the meat is coming from and probably know the farmer that reared it. The market bifurcates into two basic strategies, low price and high quality (see also Porter's Cost Leadership and Differentiation). The consumer who's willing to pay a little bit more for a little bit more quality ends up having to pay a lot more rather than a little bit more, because the pool of people who could spread the fixed costs of the higher quality is split - most go for the lowest priced product. There's a ratchet effect, where slightly higher quality products are, at the margin, increasingly expensive because there's no scale in that strategy: the more expensive they become the less uptake they get, which means they have less scale, which means they become more expensive. In some ways it's a collective action problem: what would be a better outcome for a large group of people can't really occur because individual actions can't sustain a stable state change. In other ways - many, if not most economists believe this - it's a better outcome overall, because more people get to use the bargain basement product. But I think people in the middle are usually worse off in commoditized markets.