[2603.23685] The Economics of Builder Saturation in Digital Markets

Economics > Theoretical Economics arXiv:2603.23685 (econ) [Submitted on 24 Mar 2026] Title:The Economics of Builder Saturation in Digital Markets Authors:Armin Catovic View a PDF of the paper titled The Economics of Builder Saturation in Digital Markets, by Armin Catovic View PDF HTML (experimental) Abstract:Recent advances in generative AI systems have dramatically reduced the cost of digital production, fueling narratives that widespread participation in software creation will yield a proliferation of viable companies. This paper challenges that assumption. We introduce the Builder Saturation Effect, formalizing a model in which production scales elastically but human attention remains finite. In markets with near-zero marginal costs and free entry, increases in the number of producers dilute average attention and returns per producer, even as total output expands. Extending the framework to incorporate quality heterogeneity and reinforcement dynamics, we show that equilibrium outcomes exhibit declining average payoffs and increasing concentration, consistent with power-law-like distributions. These results suggest that AI-enabled, democratised production is more likely to intensify competition and produce winner-take-most outcomes than to generate broadly distributed entrepreneurial success. Contribution type: This paper is primarily a work of synthesis and applied formalisation. The individual theoretical ingredients - attention scarcity, free-entry dilution, superstar...