Is Microsoft a Monopoly

1
Is Microsoft a Monopoly?

• By José D. Maldonado
• Francisco J. Robles
• Econ 4016 Sec 081
• Dra. Ivonne del C. Díaz

2
Introduction

• Illustration 13.1 tries to answer the following
  questions
• Is Microsoft a monopoly in the market for PC
  operating systems?
• Does Microsoft have sufficient market power to
  harm consumers?
• Will consumers benefit if Microsoft is broken up
  into two smaller companies?
• This questions can not be answered definitively
  in short illustration or even in a long one.

3
Alan Reynolds(director of economic research at
the Hudson Institute)

• It is reported that Windows runs on more than 90
  percent of the worlds PCs.
• Usefulness of market share most consider the
  market definition.
• Dominant firms are normal in high-tech industries.

4
Richard Schmalensee (MIT economist and expert
witness for Microsoft)

• Microsoft does not have a high degree of market
  power and is not a harmful monopoly.
• Market power depends on the availability of close
  substitutes.

5
Franklin Fisher (MIT economist and expert witness
for Deparment of Justice)

• Microsoft has engaged in anticompetitive conduct
  that has restricted competion.
• The government introduced evidence that pictured
  a firm obsessed with beating its rivals in every
  way possible.
• Microsofts tactics seem ruthless but the same
  strategies would be expected of any other
  profit-maximizing firm.

6
The Economist (Editorial opinion in the British
news magizine)

• It is dificult for antitrust enforcement agencies
  to demonstrate that consumers are harmed by
  monopoly abuse in high-tech markets.
• The Economist worries that Microsoft can stifle
  innovation and inflict serious harm to a
  high-tech consumers.

7
Gary Becker (Nobel Prize-winning economist at
University of Chicago)

• Department of Justice believes that breaking up
  Microsoft is needed to encourage faster
  technological innovation.
• Economists are not sure that competion fosters
  greater rates of innovation than monopoly.
• Joseph Schumpeter believed that monopoly markets
  experience higher rates of innovation than
  competitive ones.

8
Conclusion

• November 1, 2002
• Federal judge aproved most of the provisions of
  an antitrust settlement between Microsoft and the
  US DOJ.
• The sanctions are to last at least five years
  unless extended by the court.
• The settlement requires Microsoft to disclose
  some sensitive technology to its rivals.

9
Questions