The microsoft case

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The microsoft case


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The microsoft case Document Transcript

  • 1. THE MICROSOFT CASE 1 The Microsoft Case An Assignment Submitted by Name of Student Name of Establishment Class XXXX, Section XXXX, Fall 2012
  • 2. THE MICROSOFT CASE 2 The Microsoft Case A set of civil actions called “United States v. Microsoft” was filed against Microsoft after a long investigation concerning Microsoft’s big share in PC operating system market (Hazlett, 2008). Indeed, Microsoft was very successful at that time, as it produced nonexclusive goods, which were affordable to almost anyone; that is why Microsoft filled every market niche so that all the competitors had hard times. In this case it was harmful for all market parties that Microsoft could become a monopolist, because monopolies are not natural. Monopolists have influence on market prices and it is bad for market economies. Fisher (2000) believes that “Usually, when a company becomes big and monopolistic, it becomes inefficient”. Monopoly market structure creates imperfect competition and barriers to entry into market; this causes high prices, poor competition and slow market development. Nevertheless, there is a kind of natural monopolies – “company that experiences increasing returns to scale over the relevant range of output and relatively high fixed cost” (Binger & Hoffman, 1998). Companies in such industries have huge costs on infrastructure and that is why it is more efficient if there are only one or very few companies in the industry. A big amount of small companies in such industries is either inefficient or simply impossible. Moreover, there are government-granted monopolies. Such companies are provided with exclusive privilege by the means of law, regulation and other mechanisms of government enforcement. The examples of natural monopoly are utilities such as water supply systems, railroads, pipelines, electric power transmission systems etc. Imagine if there were many firms in water supply industry. Each of them would have to put its own pipes system and all cities would be under construction forever.
  • 3. THE MICROSOFT CASE 3 References Binger, B & Hoffman, E. (1998). Microeconomics with Calculus, 2nd ed. 406 Addison-Wesley Fisher, G. A. (2000, May 30). Why is Microsoft a Monopoly? In Microsoft Monopoly. Retrieved September 24, 2012, from Hazlett, T. (2008, January 28). US v Microsoft: who really won? Retrieved September 24, 2012, from 000077b07658.html#axzz27OMSPWOI