WINNERS LOSERS AND MICROSOFT BY STAN J LIEBOWITZ AND STEPHEN E MARGOLIS PRESENTATION BY MATT HOWARD

OVERVIEW Book talked about many economic concepts that effect markets. Main talking points of my paper Utiitarian Markets The Network Effect Path Dependence Which contains three separate levels

UTILITARIAN MARKETS Utilitarianism a theory that the aim of action should be the largest possible balance of pleasure over pain or the greatest happiness of the greatest number. Simple decisions that are easily predicted with this concept Examples: choose the car that accelerates faster, house that’s better insulated, TV with a clearer picture Complex decision (which is why the market is so unpredictable) Examples: music, favorite television show

NETWORK EFFECT Defined as, the idea or concept that as more people have an object it becomes more useful to you as well as the community. Example: A telephone would be useless if you were the only one in the world that had one-though if all your family and friends have them they are extremely valuable.

PATH DEPENDENCE Generally Speaking, means that HISTORY MATTERs Past decisions that you may have wished were different are decided rational or irrational through this Each decision falls into 1 of 3 categories

PATH DEPENDENCE (FIRST DEGREE) Decision could have been better looking back No harm came from the decision Decision made sense at the time Example; House is bought and makes sense based on income you had at the time Looking back now with your new income you could have purchased a better one Decision was rational

PATH DEPENDENCE (SECOND DEGREE) Decision could have been better looking back Harm came from the decision later on, though this harm could not have been predicted Decision made sense at the time Example; House is bought and later on down the road a sewage plant is built behind the house. Decision was rational

PATH DEPENDENDCE (THIRD DEGREE) Decision could have been better looking back Known harm came from the decision Decision did not make sense because of this known harm Example; House is bought and at the time of purchase it is known that a sewage plant will be built behind the house soon. Decision was irrational

CONCLUSION Overall purpose Examine how the market works Examine how consumer decisions make the market so unpredictable Think about how your own decisions affect the market