What is a Winner-Takes-All Market

A winner-takes-all market is a market in which the best performers are able to capture a very large share of the rewards, and the remaining competitors are left with very little. The expansion of winner-takes-all markets widens wealth disparities because a select few are able to capture increasing amounts of income that would otherwise be more widely distributed throughout the population.

BREAKING DOWN Winner-Takes-All Market

Many commentators believe that the prevalence of winner-takes-all markets is expanding as technology lessens the barriers to competition within many fields of commerce. A good example of a winner-takes-all market can be seen in the rise of large multinational firms, such as Wal-Mart. In the past, a wide variety of local stores existed within different geographic regions. Today, however, better transportation, telecommunications and information technology systems have lifted the constraints to competition. Large firms like Wal-Mart are able to effectively manage vast resources in order to gain an advantage over local competitors and capture a large share in almost every market they enter.

The meteoric rise of the U.S. equity markets between 2007 and early 2018 has led to what some believe is a winner-takes-all market. Wealthy people who have a large percentage of their overall wealth invested in the U.S. equity markets have taken advantage of large market gains during this period which have led to outsized increases in income and wealth when compared to the growth experienced by the rest of the U.S. population. Wealth and income disparity has increased significantly during this period with a large portion of the gains going to those already residing within the top 1% of earners.