The Microsoft Case - Essay Example

The Microsoft Case Task Why was Microsoft investigated for antitrust behavior? There was a need for the antivirus investigationfor antitrust behavior because Microsoft is a large diversified computer software producer with utmost valuations in the global market. Therefore, the investigation is necessary to avoid production of low quality products and in order to manage the competition with other rival companies. According to Kiang (2010), on his article Google+ Launch Resuscitates Antitrust Concerns there was several antitrust behavior allegations on the Microsoft that led to investigation by Department of justice of the US and Federal Trade Commission to verify the claims and take necessary precautions.

The company was involved with zero marginal price deals with computer producers that brought stiff competition in the market because other companies would not meet this zero marginal price. According to the Kiang (2010), the company was illegally leveraging its monopoly power in the operating systems market by giving its applications programmers with unfair lead time. The company was involved a with license agreement in which conditions had minimum commitments that amounted to exclusive dealings by the monopolist.

Moreover, the antirust behavior investigation was as a result of claims by Novell that the company was unlawfully trying DOS windows in the market. The Microsoft managed to hide some interfaces from third party applications software firms and it intentionally sent error messages to users of other software when users tried to use it in combination with Microsoft’s operating system. Finally, the investigation was carried because the company had bought Intuit Company that had a market share of 90 percent.

However, the merger would take the market structure from being duopoly to a monopoly, but Microsoft Company abandoned plans from the merger several weeks after the suit was brought that led to investigation of antitrust behavior of the company in the market.Do you agree or disagree that Microsoft was trying to gain monopoly power in the computer software industryBy tying to purchase the Intuit Company that had largest shares in the market, I agree the company was trying to adopt the monopoly power in the computer software industry.

The company wanted to be a price taker in the market that could result into imperfect competition over other firms in the industry (Mukherje, 2010). Meanwhile, the company option of zero marginal price to its manufacturers show that it wanted to gain the monopoly market structure due to its marginal revenue that are greater than marginal cost. According to Hall and Lieberman (2005), the demand curve of the monopoly company slopes downward because the consumers believe rightly that the Microsoft products is little better than its competitor’s products.

Meanwhile, it slopes downwards because the company will be seller taker and the only firm in the industry that will produces the differentiated products. The zero marginal prices by Microsoft led to X-inefficiency because the company did not have technical efficiency due to lack of competitive pressure. The Microsoft Company by trying to be a monopoly by merger would take over the whole industry because there are barriers on new firms to enter the market that led to claims by other firms that were disadvantaged in the industry.

Some entries barriers are natural and others are artificial that means under there is natural monopoly and government monopoly. Hall and Lieberman (2005) indicate that under government monopoly there are other competitors in the industry but the government imposes barriers to these companies and allows only one company to control the market like the case of Microsoft Company. The monopoly pricing by monopoly makes the company produce supernormal profits or economics profit in the market because it has market power (Mukherje, 2010).

Are monopolies always bad?Finally, in case where the company takes control over the market legally and there is limited deadweight loss to the society the monopoly is good. The monopoly that maximizes the economics profits at the same take taking care of society benefit will be good to the community. The natural monopoly companies are good because the cost of production is less compared to sales produced that lead to beneficial economies of scales in the market for example, power and gas companies.

ReferencesHall, R. & Lieberman, M., (2005). Economics: Principles and Applications. New York: CengageBrain Inc.Kiang, C. (2010). Google+ Launch Resuscitates Antitrust Concerns. Accessed on January 22, 2012 from http://www.policymic.com/articles/google-launch-resuscitates-antitrust-concerns.Mukherjee, S., (2010). Modern Economic Theory. New Delhi: New Age international press.