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Microsoft and Antitrust - Essay Example

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Microsoft was alleged to abuse monopoly power on its personal computers because of bundling Microsoft windows and internet explorer. Microsoft as a giant software manufacturer produced operating system…
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Microsoft and Antitrust
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Microsoft and Antitrust United s department of justice filed a civil action against Microsoft. Microsoft wasalleged to abuse monopoly power on its personal computers because of bundling Microsoft windows and internet explorer. Microsoft as a giant software manufacturer produced operating system for pc’s and application software to run the systems. By bundling their internet explorer with the operating system, Microsoft gained victory in the browser sector as every operating system had internet explorer software (Evans, 2002). Besides, Microsoft license agreement with OEMS precluded other operating systems from fair competition and sale of their products.
I therefore agree that Microsoft attempt is one of gaining monopoly power in the software industry. The windows operating system and the internet explorer browser are completely different products that should not be bundled together (Evans, 2002). Microsoft decision is thus one that denies fair competition from other browsers and their restrictive licensing is monopoly intended.
A monopoly market structure is one where there is one provider of a product or a service.
In a pure monopoly one firm has the complete control in the production of their products because of barriers of entries for other businesses. There is therefore no competition in the industry and the pricing is not based on the forces of demand and supply. I am against monopoly structure because it promotes inefficiencies and discourages competition. Consequently, monopoly products are of low quality and are highly priced hence encouraging consumer exploitation.
In a monopoly, prices and quantity demanded is set at the point of intersection of the marginal revenue and marginal revenue curve. If the marginal cost cuts the marginal revenue curve from the lowest point possible, it means that the firm is operating at optimal capacity and there is no room for expansion and it is at this point that the profit is maximized (Fellner, 1949). Since the demand curve is downward sloping, a reduction in price is accompanied by a corresponding increase in the quantity sold. The firm is therefore the price marker and therefore records high economic profits.
Monopoly also deprives consumers their sovereignty of choice, as there are no substitutes for the company’s products. Failure or conditions that can halt the production of a company’s products will therefore result in acute shortages. Monopoly pricing coupled with artificial shortages to the society will result into dead weight loss to the society (2009). The locative inefficiencies in monopoly lead to loss by the society. Moreover, monopolies have been responsible for the slow growth of economies is there are few firms in the economic systems hence reducing the rate of employment and economic activities (Fellner, 1949). Governments that are in need of improving the welfare of their consumers must make all attempts to eradicate monopoly and allow for competition.
In the case of government monopoly, the government will license one firm in the industry and bars all other firms from investing in the industry. Here, the government has an interest in the products and it should be for the benefit of the public. A natural monopoly on the other hand is whereby it is advantageous to have one firm production because of cost-technology efficiency (2009). The largest supplier that is always the first supplier, enjoys economy of scale production and can therefore invest in high technology and produce at the lowest cost possible. Other potential entrants are therefore barred from gaining market entry.
On the other hand, there are instance that monopoly should be encouraged. Monopolies may be preferred because the large economies of scale lowers the cost of production and makes it possible for the use of better technology (Fellner, 1949). This justifies the government action of banning entry in production of some consumer goods to cater for the interest of the society.
In conclusion, monopoly results in inefficiencies and loss to the society in general. The government should thus remove barriers to entry and promote competition to increase production efficiency unless the intention is to improve the welfare of the society.
Reference List
Evans, D. S. (2002). Microsoft, Antitrust and the New Economy Selected Essays. Boston: Kluwer Academic Publishers.
Fellner, W. (1949). Competition Among the Few; Oligopoly and Similar Market Structures. ([1st ed.). New York: A.A. Knopf.
Monopoly Power. (2009). Mosman: IMinds. Read More
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