The Question of MonopolyThe Question of Monopoly

Presentation copyright © 1999 by Barry Brownstein

What is a Monopoly?What is a Monopoly?

Any individual or organization operating with the advantage of special privilege granted by government. The privilege may take the form restrictions on entry.

Example- The local power company, taxicabs, the American Medical Association (AMA), state liquor stores

Price TakerPrice Taker

A firm that cannot effect prices by its own actions. They can sell all they want at the market priceP

Q

D

Perfectly elastic demand

Price SearcherPrice Searcher

At higher prices will sell less, at lower prices they will sell more. They face the typical downward sloping demand curve.

Q

P

Demand

QuestionsQuestions

Does a firm have a monopoly if its publishes the only morning newspaper in town?

Do public schools have a monopoly?

Is Microsoft Anti-Is Microsoft Anti-Competitive?Competitive?

“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”

the discovery process of the market discovers new ways to satisfy consumer demand

price is falling, quality is increasing

Microsoft ContinuedMicrosoft Continued Consumers determine their optimal product mix-

for example they prefer to buy a car not a kit consisting of an engine and radio etc.

Control of the browser market does not control the internet (content)

Restricting innovation is anti-consumer If Microsoft is a ‘dangerous monopoly’ what

about public schools, the post-office, social security etc.

The Future of MicrosoftThe Future of Microsoft danger to the market process of turning

Microsoft into a regulated utility dominance in one area does not guarantee

leadership in other areas

– Microsoft’s difficulties in selling software smaller single use ‘appliances’ and Internet telephones

In the coming world of cheap bandwidth has Microsoft bet too much on proprietary software?

Appendix: Proprietary vs. Appendix: Proprietary vs. Open PlatformsOpen Platforms

In a networked economy closed systems have to open up or fail

– Apple

– Citibank’s first non-network ATMs in the 70’s Two camps in Microsoft

– create a cross platform rival to Java-Brad Silverberg

– keep focus on Windows- Jim Allchin “There’s nothing about that slide that I like…hasn’t

anybody here heard of Windows”-Bill Gates