The Question of Monopoly Presentation copyright © 1999 by Barry Brownstein

What is a Monopoly? l Any individual or organization operating with the advantage of special privilege granted by government. The privilege may take the form restrictions on entry. l Example- The local power company, taxicabs, the American Medical Association (AMA), state liquor stores

Price Taker l A firm that cannot effect prices by its own actions. They can sell all they want at the market price P Q D Perfectly elastic demand

Price Searcher l At higher prices will sell less, at lower prices they will sell more. They face the typical downward sloping demand curve. Q P Demand

Questions l Does a firm have a monopoly if its publishes the only morning newspaper in town? l Do public schools have a monopoly?

Is Microsoft Anti- Competitive? l “The financial interests of the lawyers and economists who make up this (anti-trust) industry …is in the promotion of complex and ever-changing “rules of the game” that inflate the demand for their services” l the discovery process of the market discovers new ways to satisfy consumer demand l price is falling, quality is increasing

Microsoft Continued l Consumers determine their optimal product mix- for example they prefer to buy a car not a kit consisting of an engine and radio etc. l Control of the browser market does not control the internet (content) l Restricting innovation is anti-consumer l If Microsoft is a ‘dangerous monopoly’ what about public schools, the post-office, social security etc.

The Future of Microsoft l danger to the market process of turning Microsoft into a regulated utility l dominance in one area does not guarantee leadership in other areas –Microsoft’s difficulties in selling software smaller single use ‘appliances’ and Internet telephones l In the coming world of cheap bandwidth has Microsoft bet too much on proprietary software?

Appendix: Proprietary vs. Open Platforms l In a networked economy closed systems have to open up or fail –Apple –Citibank’s first non-network ATMs in the 70’s l Two camps in Microsoft –create a cross platform rival to Java-Brad Silverberg –keep focus on Windows- Jim Allchin l “There’s nothing about that slide that I like…hasn’t anybody here heard of Windows”- Bill Gates