Question

Please respond to the following post.

• On what basis did the court conclude that Microsoft was a monopoly (see “Market Share”)?

Due to Microsoft owning over 80% of market shares for Intel-compatible PC operating systems.

• What was Microsoft’s market share of Intel-compatible PC operating system? Of all operating system, including those of Apply computers?

90% of the intel-compatible PC operating system is Microsoft owned. Microsoft’s strength of shares is above 80% when including Apple and other competitors in the market.

• What evidence did the court cite in claiming that Microsoft charged above-competitive prices (see “Microsoft’s Pricing Behavior”)?

There were 3 reasons linked into the over-charging customers, which are:

• 1. Inconsiderate of other vendors when setting Windows 98 prices
  2. Increased prices for Windows 95 OEMs to the same price as Windows 98 (older OS should have decreased or maintained same value)
  3. Over-charging for the Windows 98 upgrade product. A lower price of $49 would have remained profitable but raising the price made it clear that the organization wanted to demolish the competition.

• Reflection: The understanding of monopolistic competitive nature was an interesting read because of the in-depth description of what all goes into the planning of this. The golf ball example provided int the Monopolistic, Chapter 10 was a helpful explanation. Also, this applies to many products that we all utilize. If I am really grasping the concept, then that means that the industry for t-shirts is another good example. You have your differences between them all such as cotton, polyester, and now moisture wicking made. The selling point from all companies will be the benefit that could be received by wearing a specific t-shirt. The company will include other aspects to consider such as how the shirt will differentiate while working out or in weather conditions. Commercials and other marketing strategies are set forth in order to persuade consumers to purchase. Once again, I thought the breakdown of how it works was interesting.

Answer 1

A possible response to this post could be as follows:

Assuming that the question is around monopoly firm, its pricing practices and the relevant laws that prohibit anti-competitive behavior.

First we need to determine what kind of businesses are more suited for the dominance by a monopoly firm. T-shirt (or any other apparel) industry is clearly not one of them as there are a great number of firms that produce all types of t-shirts. An example of monopoly could be a firm that has the sole right to sell gasoline (or petrol) in a geographical area. This is an example of a monopoly that gets created by legal action. The one in the discussion thread (Microsoft) is an example that got created due to the network effect of everyone running their PCs on Windows and eventually nobody wanting to try any other operating system. This could be an example of a monopoly arising out of a product that nobody can produce or a product that is so superior that no other competing product can stand against it. And obviously it is a cycle - as the product strengthens the producer of this product acquires pricing power and starts thwarting competition which strengthens its product some more and so on.

The governments don't like monopolies since the consumers are forced to pay a high price (and also lose good alternatives since the competing firms go out of business).

I hope you find it useful.