The Microsoft Corporation Antitrust - Essay Example

The author states the second allegation as that Microsoft had various contractual agreements with computer manufacturers and Internet Service Providers that effectively allowed the company to retain a monopoly over the market. The third allegation is that the company attempted to monopolize the market for Internet browsers by including a default version of Internet Explorer with their operating systems, and the last allegation is that the company bundled the said Internet browser with all its operating systems, an act that is illegal under the Sherman Antitrust Act (Economides, 2001).

After an analysis of the allegations listed above, it is completely agreeable that Microsoft Corporation was trying to gain a monopoly over the market because the acts that it performs can be deduced to be too competitive. This conclusion is arrived at because the company introduces barriers to entry to the market by making sure that all their products (operating systems) are bundled with their own Internet Explorer. This fact will ensure that new software producers have steep barriers to entry into the browser software market. Another fact that concludes that Microsoft Corporation tried to monopolize the software market is that the company is the main competitor in the market for operating systems, so, having contractual agreements with Internet Service Providers effectively means that the company controls the market for Internet browsers.

However, monopoly market structures are not always bad, though they restrict the competitive effect of the market by increasing their market power and introducing barriers to entry. A Pure Monopoly has many characteristics, the main one being the lack of competition because the company operates alone in a market. In this case, the monopoly market structure is not bad because the pure monopolist controls the price structures in the market, though it also increases the barriers to entry in the market.

A Pure Monopoly can be introduced by factors outside the control of the market, for example, government monopolies like utility companies. In this case, the government controls a natural monopoly that controls the provision of essential products to the market; products whose prices need to remain constant to control the economy. When the prices remain constant, the economic profits that a company gets in the market do not increase as the marginal revenues increase; because the marginal costs increase at the same rate. This means that government monopolies help to control the effect of monopolistic pricing in the market.

In every market, the demand curve is supposed to be downward sloping, because the pricing of the product determines the amount of product that the customer will buy. However, with monopolistic pricing, the demand for a product is solely determined by the monopolist firm, so the consumer does not control the demand curve. A monopolistic company will have price power in the market which effectively means that the price market is controlled by one firm, which leads to imperfect competition.

However, monopolies are not always bad for the market, because as already stated; government monopolies subsist that control the provision of essential utilities to the market. An example where a monopoly is not a bad thing is when the government monopolizes the provision of electrical services to the public because giving the services to a private company might increase the accompanying utility costs. Read More