The American religious marketplace is almost a study in perfect competition: there are no real barriers to entry, the domestic market is big enough to support a mind-boggling variety of religious producers, and new religious entrepreneurs are always rising up to challenge incumbents. (P. 174)I agree with their conclusion, yet their discussion misses a glaring issue. How is it that the religious marketplace is so competitive when there are such strong network effects that work in favor of religious monopoly?
Network effects, also called network externalities, arise when one person's consumption of a good influences another's consumption of that good. For example, my benefits from using Facebook are more enjoyable if all of my friends also use Facebook. A similar effect arises with religion: if all of my friends belong to religion X, then I would enjoy religion X more than if they were not in religion X.
Economists have long recognized that network effects often result in natural monopolies, which arise when a single-supplier is the most efficient industry structure. That religion exhibits network effects but has not led to a natural monopoly in the U.S. may be due to the other characteristics of religion that are not found with other natural monopoly settings, such as low barriers to entry.
What other reasons help explain why religion in the U.S. is quite competitive despite the network effects that work in favor of natural monopoly?