Question

Respond to the following post :

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

The court concluded that Microsoft was a monopoly based on their continuous dominance of the market for intel-compatible PC operating systems. Microsoft owned over 94% of the market and those numbers were projected to rise over the next years.

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

Microsoft had a majority of the market share for Intel-compatible PC operating systems. When the report was written (1999), Microsoft had over 90% of the market share over the past decade and over the last couple years, it climbed to over 95% and was expected to climb even higher. If Apple’s operating system were included, Microsoft’s share would still be well above 80%.

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

There was multiple evidence that Microsoft charged above-competitive prices that supported the claim of them abusing their monopoly power. The court cited that Microsoft did not consider the prices of others when they set their price for Windows 98. Microsoft also raised the prices of their old operating system, matching the price of the newly released operating system, in hopes of customers buying the new Windows 98.

Microsoft also combined a combination of middleware, that was designed to weaken the application barriers of its competitors.

• Reflection – the students also should include a paragraph in the initial response in their own words reflecting on specifically what they learned from the assignment and how they think they could apply what they learned in the workplace or in everyday life.
  This week I learned that in a perfectly competitive firm operates at the most efficient point (lowest per unit cost) (McGlasson, ND) Whereas the monopolistically competitive firm, operates just shy of the peak efficiency as they are operating at a slightly higher cost and produce fewer units (McGlasson, ND). Consumers control the monopolistically competitive environment, as when consumers perceive a product to be different or better due to advertisement or celebrity endorsements, then that product is better than its competition.

Answer 1

There are four types of market structure operating :

Perfect Competition : In a perfect competitive market, there are many sellers and each seller tries to match the price charged by all the sellers in the market. If any seller raises the price above the market equillibrium, its difficult to get the customers and thus forced to regain the original price. At the same time, if any seller reduces the price below the equillibrium, he will have to compromise in his profits and thus bring back the original price.

Monopoly : There is only one seller in the market. He has the privilige to charge the desired price in the market. Monopoly can be commanded by having a unique product such as Microsoft. As Microsoft dominates the market by its unique prodcut and enjoys the highest market share, so commands monopoly in the market. Microsoft is enjoying the highest market share of 94% and thus controls the entire market. It has got the privilige of charging prices above the competitors and thus control the entire market.

Monopolistic Competition : In a monopolistic competitive market, there are many sellers and each seller has unique product. Due to their unique product, they can charge high price compared to competitors. But the high price can be charged only in a condition when the seller makes the product unique due to its unique features, low price, packaging, advertisement and celebrity endorsements. For instance, there is a monopolisctic competition in personal care products like soaps. A soap manufacturer can charge high price only if the product is unique, attractive packaging, advertising or celebrity endorsements.

Oligopoly : There are few sellers with differentiated product and high level of mutual interdependence amongst the sellers.