Discuss whether Microsoft's monopoly position is in the public interest - Essay Example

From an economic point of view, the question that may be asked by many people is whether this kind of monopoly is good for the public or the consumers or not. Microsoft has achieved a number of monopolistic positions in the market due to its bundling activity. In its early years, Microsoft entered into a deal with the main hardware manufacturers to compel them to sell each of their PC with Microsoft operating system and other application software. This meant that even those who did not intend to use Microsoft’s software had to pay for it then buy other software.

Bundling other products such as a web browser and a media player with its operating system software has led to the firm gaining unfair advantage over competitors. However, it is the bundling of the java Runtime Environment that has caused the greatest commotion. JRE was developed by the now defunct Sun’s Microsystems and was meant to deliver a platform free programming environment through java. When Microsoft bundled it in its OS, it corrupted it and this was seen to work against the very idea of having a platform free programming environment.

Monopoly has never been seen as good for the end consumers. In a country like America, monopoly or monopoly-like business situations have been seen to be harmful to the consumers as they make the producers so powerful that they can abuse their power, much to the consumers’ disadvantage (Geisst, 2000). Every firm looks and dreams of a monopoly in the market. Even for those businesses which operate in highly competitive markets, they always seek to create monopolistic environments, for their own advantage and not to the advantage of the consumers (Lele, 2007).

With regard to Microsoft’s monopoly, the effect can be seen as both good and bad. Microsoft’s monopoly position is bad for consumers Microsoft’s monopoly is not in the public interest because monopoly in itself means that the firm can control the prices as well as the quality of the products it sells to the consumers. Monopoly, as Clark (2011) argues, is the opposite of perfect competition. Perfect competition is what is seen to be the ideal situation for consumers because the firms in a perfect completion market environment engaged in perfect competition and have to continue reducing their prices in order to entice the consumers (Machovec, 1995).

Above, diagram showing how completion affects prices of products. Source: http://www.revisionguru.co.uk/economics/perfcomp.htm As Klein (2007) says, in perfect competition also, the firm also seek to improve the quality of the products in order to have an advantage over the other firms. These two factors, that is, quality and prices, are very important for the consumer. Above, diagram showing perfect competition in the long run equilibrium, Source: http://www.bized.co.uk/reference/diagrams/Perfect-Competition---Long-Run-Equilibrium When competition is eliminated and one firm or a group of few numbers of firms have a monopolistic position in the market, the firms don’t have to reduce their prices or increase the quality of their product (Khan, 2007).

In this regard, Microsoft’s monopoly is not good for the consumers because it means that the firm will not be motivated to revise the prices of its products and they will also not be motivated to increase the quality of their products. In the current situation, it means that Microsoft can decide how much to sell its software, especially its operating system and the office suite.