...Is Microsoft a Monopoly? Preliminary version April 4, 2000 Steven Cuellar Department of Economics San Jose State University San Jose, CA. 95129 Phone: (408) 924-5408 E-mail: SCuellar@email.sjsu.edu Presented at the Department of Economics Seminar San Jose State University San Jose CA. 95129 April 7 th 2000 Is Microsoft a Monopoly? 1 This would occur in the case natural monopoly in which economies of scale result in a single firm producing at a lower cost than a large number of smaller competitive firms. 1 Since the beginning of the antitrust trial against Microsoft there has been a great deal of commentary and analysis concerning the market position, pricing and strategic behavior of Microsoft. The courts Finding of Fact and the recent Conclusions of Law have intensified the interest in the case and resulted in even more analysis and questioning of the courts findings. This paper adds to the current list of Monday morning quarterbacks questioning among other issues: Whether or not Microsoft is a monopoly? Did they violate the antitrust laws? Have they harmed consumers? If the answer to previous questions is in the affirmative, then what remedies should be enacted? The purpose of this paper is to address the first and perhaps the most contentious question of whether or not Microsoft is a monopoly. Although most people have a general understanding of what a monopoly is, to eliminate any ambiguity it is helpful to establish a precise definition of monopoly...
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..."Microsoft Corporation, is a multinational computer technology corporation with global annual revenue of US$44.28 billion and 71,553 employees in 102 countries as of July 2006. It develops, manufactures, licenses, and supports a wide range of software products for computing devices. Headquartered in Redmond, Washington, USA, its bestselling products are the Microsoft Windows operating system and the Microsoft Office suite of productivity software, each of which has achieved near-ubiquity in the desktop computer market. Microsoft possesses footholds in other markets, with assets such as the MSNBC cable television network, the MSN Internet portal, and the Microsoft Encarta multimedia encyclopedia. The company also markets both computer hardware products such as the Microsoft mouse as well as home entertainment products such as the Xbox, Xbox 360 and MSN TV" ("Microsoft Corporation by eknowledge"). By law a monopoly is not allowed to exist in the US. It has been long discussion whether Microsoft is a monopoly or not? Among other charges Microsoft was charged with "monopolizing the computer operating system market, integrating the Internet Explorer web browser into the operating system in an attempt to eliminate competition from Netscape, and using its market power to form anticompetitive agreements with producers of related goods" (Economics: Resource Center). Because it obtained the current monopolistic state through innovation and its superior products many judge Microsoft a...
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...Hallo classmates, My name is Richard Orina originally from Kenya but now residing at Hudson Wisconsin. I am married and we have three teenagers boys still living with us. Though they at times drive us crazy, it’s fun to have them around. I am excited to be part of this class and I hope to get the best out of it. I am not very new in accounting subject but maybe new on line yes. This is my third class here and I am not so sure how I’m going to draw a balance sheet and other financial statements online. I welcome any assistance that will help me get into the right footing since I have been out of class learning like 17 years. Currently I work at the hospital as a nurse leader, and have held this position for More than three years. I love the job but don’t feel complacent with what I am doing. My inner man is not at peace with me yet. I have a master’s and bachelor’s degree in business management and nursing degree. I have the touch and feeling of business studies though due to job market pressure I had to drift to nursing for survival. Given that I had much of my studies outside the country; it was very difficult to get a job based on those credentials. I did nursing because it guaranteed me a job to support myself and my family in the fastest manner. After so many years of off track, I am so delighted to pursue my dream in DBA. In the past, I have held teaching position at college level and it was fun though not well paying. My vision in...
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...2012 Final Journal Topic: Monopoly and Antitrust The market power of either buyers or sellers, harms buyers who may have the opportunity to buy at competitive prices. It also reduces the production, which causes a deadweight loss. Excessive market power also raises issues of equity and justice, because if a company has too much monopoly power, it makes profit at the expense of consumers. A monopoly is a situation in which there is a single supplier or seller of a good or service for which there are no close substitutes. Economists and others have long known that unregulated monopolies tend to damage the economy by (1) charging higher prices, (2) providing inferior goods and services and (3) suppressing innovation, as compared with a competitive situation (i.e., the existence of numerous, competing suppliers of the good or service).[1] In theory, the Government or State could collect the excess profits that the company obtained through taxes and then redistribute it among the buyers of the product. However, this redistribution is usually not feasible. It is difficult to ascertain what proportion of the profits of an enterprise is attributable to monopoly power and it is even more difficult to locate all buyers and reimburse them an amount proportional to their purchases. How can society, then, limit the market power and prevent the anti-competitively use of it? In the case of a natural monopoly, i.e. an electricity/power company...
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...The Affects of Monopolies on Our current Microeconomic Situation More than anything else, the progress of the world in the 21st century depends on economics. The microeconomic situation of the United States has several determining factors contributing to it's current status. What we earn, what we save, what we spend, how deligently we work and retain our jobs is all part of the microeconomic system that controls our daiy lives. Another large factor hindering the success or downfall of the current economy is the effect of monopolies. By defintion a monopoly is a large company that has exclusive control of a commodity or service in a particular market giving them the power to manipulate prices. In a sense a monopoly is the logical result of competition. The roles of a monopoly in microeconomics severly affect the manner in which individual businesses can effectivly conduct their business in more than one way. Monopolies have forever affected our economy but these following pages are more of a generalized overview of the affects they have had strictly in the 21st century. One role of a monopoly in microeconomics is the effect it has on the pricing of goods and services. Monopolies can impact consumer prices in two obviously different ways, they can cause prices to drop so low that it forces companies out of business, or it can cause prices to skyrocket making it difficult for consumers to purchase a product. Neither of these options are necessarily good for the consumers...
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...microeconomic theory A. B. C. Microsoft as a monopolist in software industry Google as the main company’s competitor at software market Strategies taken by Microsoft to regain the competitive power and combat the global financial recession III. Conclusion: Microsoft as a company which operates at monopolistic and oligopolistic markets. 2 II. ARTICLE ANALYSIS Introduction Monopolistic power is a profit earner for many companies. It prevails in spite of the presence of government regulations against the formation of monopolistic power in the market, which brings in deformity in the competitive scenario. One of the vivid examples is the monopolistic power Microsoft has enjoyed (Burrows, 2009). A monopolist has the power to set any price they find reasonable for getting high profits. However, a monopolist cannot set both the price and quantity to be purchased at the same time. This article shows how a monopolist can charge whatever price it deems to but it is not in their power to set the quantity of the product demanded. Therefore, a monopolist must increase prices in order to gain market share. Further, a monopolist sets different prices in different places. This price discrimination depends on the demand of the product among different subgroups of the target customers. 3 This essay is a review of the article Microsoft's Aggressive New Pricing Strategy, which was published on 16 July 2009 in Businessweek regarding the new strategy that Microsoft has adopted to reduce the...
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...Vallillee There are different classifications of markets and the structure of a business determines which classification it will fall into. Markets are divided according to the composition of the business and what it provides to the specific market. Business composition is determined by the structure of market characteristics, and this helps determine level and area of competition. The characteristics in a market with the most concentration focus on number of purchasers and retailers, level in which a product has a substitute, price, entry and exit ease, and the level of mutual dependence. These structured variables are classified in the following market structures: perfectly competitive markets, monopolistically competitive markets, monopolies, and oligopolies (Colander, 2010). A perfectly competitive market exists when every contributor is considered a “price taker”, and none of the contributors influences the price of the product it sells or purchases. Two examples of a perfectly competitive market would be milk and gas. There could be many suppliers of both products, and if one supplier wants to raise their price higher than the price the market determines, consumers will go elsewhere to purchase the item in need. Other characteristics could include: zero entry and exit barriers, zero transaction costs, profit maximization, homogeneous products, and perfect factor mobility (Colander, 2010). In a competitive market price is determined the quantity of product, marginal...
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...Chapter 8 Producer and Consumer Surplus consumer surplus — the value the consumer gets from buying a product less its price. producer surplus — the price the producer sells a product for less the cost of producing it. Burden of Taxation A tax paid by the supplier shifts the supply curve up by the amount of the tax. The loss of consumer and producer surplus from a tax is known as deadweight loss . Deadweight loss is shown graphically by the welfare loss triangle — a geometric representation of the welfare cost in terms of misallocated resources caused by a deviation from a supply/demand equilibrium. The cost of taxation includes the direct cost of revenue paid, lost surplus, and administrative cost. Interestingly, in terms of aesthetics, people have come to like the style of Paris roofs; it is one of the many things that makes Paris distinct. Including aesthetics complicates the analysis enormously. Economic reasoning is based on the architectural view that form follows function. Who Bears the Burden of a Tax? Taxes are like hot potatoes: Everyone wants to pass them on to someone else. Nobody wants to pay taxes, and there are usually large political fights about whom government should tax. For example, should the Social Security tax (mandated by the Federal Insurance Contributions Act, or FICA) be placed on workers or on the company that hires them? The supply/demand framework gives an unexpected answer to this question. Burden Depends on Relative Elasticity ...
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...Introduction to Economic Analysis- 153400003 AS1 Using examples, discuss critically the costs and benefits of monopoly in modern economies. Richard Itaman Student Name: Allegra Campinoti Student ID: 628548 Word Count: 2100 Monopoly is defined as “a market served by a single seller of a product with no close substitutes.” (388 ,Frank and Parker 2007) For a monopoly to be successful there can’t be any close substitutes that are able to provide a similar product or service the firm is offering. Monopoly can be formed if one or more combinations of five main factors are fulfilled. The first being exclusive control over important inputs, meaning that the firm has a unique product which is very hard to emulate. The second that it exploits economies of scales, the long-term average costs of the production of a certain quantity of a product will be much lower if only one firm is the producer. The third is the existence and use of patents, something that gives the right to a firm for the exclusive use and benefits of a certain idea produced by the firm. “ The protection from competition afforded by the patent is what makes it possible for the firm to recover its costs of innovation.” (390 ,Frank and Parker 2007) If patents were not present competition would cause price to reach marginal cost and the innovation and development would have a much slower pace. The fourth factor is Network economies; this occurs when the consumer’s demand of a certain product increases so much...
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...many enterprises will do whatever it takes to stay on top. The United States has laws that are ordinarily used as a way to make sure that honest and fair practices are followed in business organizations. These laws are very important and should be strictly adhered to so that the organization's integrity stays intact while at the same time they continue increasing their customers and profits. The United States as well as many other countries has many antitrust laws that forbids acts or understandings that can get rid of or deter fair competition, these laws also forbids the maltreatment of a dominant industry position, restraint or misrepresent commerce, hold prices by artificial means, or bring forward a monopoly. I will be writing about antitrust laws and the famous Microsoft case to demonstrate how business ethics and fair practices are important in business, it’s not only right thing to do but can also be beneficial to the company, clients and employees....
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...www.cambridge.org/micro4mbas McKENZIE: MICROECONOMICS FOR MBAS PPC CMYBLK ................................................................................................................ 10 Monopoly power and firm pricing decisions If monopoly persists, monopoly will always sit at the helm of government … its bigness is an unwholesome inflation created by privileges and exemptions which it ought not to enjoy. If there are men in this country big enough to own the government of the United States, they are going to own it. Woodrow Wilson That competition is a virtue, at least as far as enterprises are concerned, has been a basic article of faith in the American Tradition, and a vigorous antitrust policy has long been regarded as both beneficial and necessary, not only to extend competitive forces into new regions but also to preserve them where they may be flourishing at the moment. G. Warren Nutter and Henry Alder Einhorn t the bottom of almost all arguments against the free market is a deep-seated concern about the distorting (some would say corrupting) influence of monopolies. People who are suspicious of the free market fear that too many producers are unchecked by the forces of competition, but instead hold considerable monopoly power or control over market outcomes. Unless the government intervenes, these firms are likely to exploit their power for their own selfish benefit. This theme has been fundamental to the writings of economist John Kenneth Galbraith: The...
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...Monopoly is nearly always seen as something undesirable. Courts have wrestled with monopoly for ages, sometimes defining it as: "the power to control prices and exclude competition", "restraining trade", or "unfair and anti-competitive behavior." Should monopolistic practices be condemned and outlawed? Let's look at anti-competitive behavior and practices, but let's not confine ourselves to what's traditionally seen as monopoly. Monopoly means that a firm is sole seller of a product without any close substitutes, controls over the prices the firms charge. Government sometime grants a monopoly because doing so is viewed not only to be in the public interest, but also to encourage it with price incentives. However, monopolies fail to meet their resource allocation efficiently, producing less than the socially desirable quantities of output and charging prices above marginal cost. Thus, this inefficiency of monopoly causes the quantity sold to fall short of social needs. Law The existence of a very high market share does not always mean consumers are paying excessive prices since the threat of new entrants to the market can restrain a high-market-share company's price increases. Competition law does not make merely having a monopoly illegal, but rather abusing the power a monopoly may confer, for instance through exclusionary practices (i.e. pricing high just because you are the only one around.) It may also be noted that it is illegal to try to obtain a monopoly, by practices...
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...Webster defines monopoly as “exclusive ownership through legal privilege, command of supply, or concerted action.” In the news lately, stories of the big bad monopolies abound. We constantly hear of government regulation in software, utilities, transportation, and financial institutions. The justice department closely scrutinizes mergers and acquisitions so that firms don't end up with too much market power. However, pure monopolies are very rare. Even the threat of serious competition entering the market forces the existing firm to act conscionably, and differently from how it would act otherwise. Recently, the internet search giant Google was under investigation by the Federal Trade Commission on suspicion of violating antitrust legislation. In 2011, Yelp Inc. filed a complaint that Google was using excerpts from other websites in their search results. Even though Google agreed to exclude other company’s “snippets” upon request, this complaint launched the investigation by the FTC. Other companies, including Microsoft, complained that Google highlights its own services first on the results page. The FTC found that even though “Google took aggressive actions to gain advantage over rival search providers… the FTC's mission is to protect competition, and not individual competitors.” The only concerns the FTC seemed to have with Google were the patents they acquired in their purchase on Motorola Mobility in 2012. Google agreed “to a consent decree that will require the company...
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...Nicholas Messina Econ201 What are some of the different types of barriers to entry that give rise to monopoly power? Give an example of each. Should government let monopolists exist or not? What are the benefits of monopoly market structure and what are those shortcomings related to monopoly? What is your opinion? (At least two pages and write down the answers to each question asked) In a perfectly competitive market, there are many firms, none of which is large in size. In contrast, in a monopolistic market there is only one firm, which is large in size. This one firm provides all of the market's supply. Some conditions that determine a monopolistic market is the fact there is only one firm competing and has entire control over supply of product with no close substitutes. The second is that there must be a high barrier to entry to explain why other firms have not yet entered the market. What are some of the different types of barriers to entry that give rise to monopoly power? Barriers to entry are defined as legal, technological, or market forces that may discourage or prevent potential competitors from entering a market. There are many different types of barriers that include government barriers, control of a physical resource, technological advancements, and large start-up costs. Governments may erect barriers that prohibits or severely limits new competitors. This is done in many cities and states that may allow a household to only use one certain energy, water...
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...Abstract Google's far-reaching social and economic impact has begun to affect some aspect of nearly everyone's life. The ability of Google to control the market share of numerous industries and facets of their corporation does not make the company a monopoly; it merely shows that quality business practices produce quality results. Google Research Paper The effects of monopolies within the economy can be potentially far reaching. The ability to dictate price, supply, and market share of a commodity with no close substitutes, in a market can be a recipe for preventing growth and innovation. Possessing market share in that of itself does not create a technically defined monopoly. According to Mankiw (2012), “A firm is a monopoly if it is the sole seller of its product and if its product does not have close substitutes.” A company that has a significant market share in only one aspect of its multiple business facets cannot be wholly a monopoly regardless of its competitors. Google is the perfect example of a pioneering company that has built quality products that in turn attracted a large customer base. That result has the government regulators and market share losing corporations clamoring for antitrust investigations. Google, incorporated in September 1998, became a publically traded company in August 2004. Less than a decade later, Google has expanded from primarily just a search engine to marketing juggernaut. In addition to the search engine aspect, Google has...
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