Market Structures in Computer Operating Systems
When purchasing a new computer the discussion on which operating system to choose does not usually come up, as there had been a monopoly in this industry since 1985 (Bellis, 2013). Microsoft with its Windows platform is a giant in the computer operating systems industry. The Microsoft Windows market structure began in an oligopolistic market, became a monopoly, and developed back into oligopolistic.
History – Early Years
In the early years of Microsoft Windows, the competition for computer operating systems was limited to MS-DOS, VisiOn, and GEM (Graphics Environment Manager). All of these systems struggled in a small demand market because no programs were being written for them. There was no need for consumers to purchase the products. In 1990, Windows 3.0 was released and with its release came extensive third-party support by programmers. This created a huge demand for the system and the software programmed for it. This demand caused the competition to disappear from the market and propel Windows into a monopoly market (Bellis, 2013).
Market Types An oligopolistic market is explained as a market where only a few firms compete, as opposed to a monopoly where one firm makes up the entire market (Colander, 2010). Microsoft Windows from 1990 to 2007 was a monopoly to the industry because consumers had no other choice or substitute for a computer operating system. This means the marginal revenue (MR) for Microsoft during this time increased as output of their system increased. The marginal cost (MC) is the change in total costs as their quantity changed. To maximize profits in this monopoly, Microsoft Windows operated as close to MR=MC as possible (Colander, 2010). As years past and the demand for the system continued to increase, marginal cost grew larger than marginal revenue (MC > MR) decreasing