Microsoft Case Essay

1121 WordsAug 10, 20125 Pages
THE MICROSOFT CASE Thuan Duong ECON312 Professor: Sara Sheikh May 20, 2012 The Microsoft Case Microsoft is a large diversified computer software manufacturer. Microsoft produces the Windows family of operating systems for personal computers and servers. It also produces applications software that run on the Windows family of operating systems, most notably the very successful MS-Office Suite consisting of Word (word processor), Excel (spreadsheet), PowerPoint (presentations), Outlook (e-mail and news), and Access (database). Almost all Microsoft products are complementary to a member of the Windows family of operating systems for personal computers and servers. Microsoft was being investigated for antitrust behavior because the company was accused of violating the Sherman Act- “Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony”, and obtaining monopoly power in the PC market. This accusation was based on the fact that Microsoft Windows was used on over 80% of the PCs that were Intel-based. Since Microsoft Windows is considered to be a network good, it created high barriers of entry into the PC market. Barriers to entry are asymmetric costs that entrants incur but are not incurred by incumbents. The United States Department of Justice and 19 States sued Microsoft alleging(1) that it monopolized the market for operating systems of personal computers and took anti-competitive actions to illegally maintain its monopoly; (2) that it attempted to monopolize the market for Internet browsers because such browsers would create competition for operating systems; (3) that it bundled its browser (Internet Explorer) with Windows; and that it

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