Increasing Returns

The Law of Increasing Returns, simply put, means that the more variables and improvements made to a product, the higher the profit will be for that product. It is exactly the opposite of the Law of Diminishing Returns; which states that at a certain point any additional changes or improvements made to a product will not matter, because your product has hit a "ceiling", so-to-speak, and no extra profits can be realized.

With increasing returns a business gains a disproportionate amount of output compared to the level of inputs. Increasing returns are most commonly seen in the technological market. A company may have software already developed and by adding a couple new things can greatly enhance the value of that software.  Basically, when your inputs are increased by x, your outputs increase by more than x, so you get more out than what you put in. It would be similar to playing a slot machine, or any other game in which you gamble with money, and winning. You put in a quarter and maybe you hit it big and win back a few thousand dollars. Or maybe you get caught cheating and security comes and throws you out the front door, at which time you land on your already bum knee and it busts wide open, leaving you with mounds of hospital debt and an inability to pay it all, especially now that your blacklisted from all the casinos and can't showcase your gambling skills (i.e., your cheating skills, which you must not be very good at anyways because you were caught).

In technological terms, increasing returns would be like adding one feature to some software that then allows you to do multiple things you couldn't do before by using the new feature. If one piece of software gets ahead of another piece, it attracts more developers and attention, thereby allowing it to get even further ahead. The market for operating systems saw this happen when they first came about. One OS, like DOS or Macintosh would make developments the other did not yet have, which would attract other software developers to make programs on that OS, which in turn would help that OS get even farther ahead than they already were. Then when they get further ahead, they get even further ahead, and when they get even further ahead, they get even even furtherer ahead; and so the cycle continues until one company becomes a superpower, igniting the arms race for fear of economical domination, and then the world ends.