StudentShare solutions
Triangle menu

Using the Concept of Network Externalities in Detecting Monopolistic Practices as in the Case of Microsoft Company - Essay Example

Nobody downloaded yet

Extract of sample
Using the Concept of Network Externalities in Detecting Monopolistic Practices as in the Case of Microsoft Company

they are connected in a virtual network. Examples of compatible products are computer hardware and software, phonographs and records, and television sets and programing. In extreme cases, network externalities may cause markets to fail as when an inferior product ‘tips’ the network towards adopting it over a superior product because it arrived first (Page & Lopatka, 1999, p.955). A market is said to have ‘tipped’ when it settles on a single standard for a product, such as software platforms (p.960). Proposition: ‘Microsoft acted illegally to extend its monopoly power.’ Corporate acts deemed anticompetitive are those that foster competition not on the merits, and lead to insufficient distribution compensation. An example is when a sufficiently large number of distributors agree to exclusivity over a sufficiently lengthy period, because this tends to drive rival firms out of the market. Distributors who have not by then signed up with the dominant firm will then have to pay a monopoly price (Rasmusen, Ramseyer & Wiley, 1991). Microsoft, as dominant firm intending to defend its market position, undertook four actions with regard to Internet Explorer (IE) vis-a-vis original dominant browser, Netscape Navigator: (1) Microsoft invested massively in browser technology; (2) IE was zero-priced; (3) Microsoft signed exclusive distribution contract with Internet access providers; and (4) Microsoft bundled IE with Windows. The court found that investment in browser technology and zero pricing were not uncompetitive, but declared exclusive distribution contracts and tying or bundling arrangements as uncompetitive (Klein, 2001, pp.46-47). Arguments in favor of illegality Microsoft engaged in actively ‘tipping’ the market, thus preventing the adoption of what could...
This paper offers a comprehensive review of the concept of network externalities and its practical applications in helping to detect the uncompetitive actions from companies. Using the example of the Microsoft company, the essay exhibits its possible excessive use of dominant market position, through the help of provisions of network externalities theory
In separate cases, governments (the US and EU) and attorneys in class action suits claimed that Microsoft’s contracts with original equipment manufacturers (OEMs) were exclusionary and anticompetitive, thereby maintaining its operating system (OS) and later its internet browser. These allegedly caused consumers to pay higher prices, discouraged innovation, and restricted trade in violation of the Sherman Act. Microsoft countered that it was not a monopoly because it still faced strong competition in a dynamic industry; its success was procompetitive because consumers benefited from its software distribution; and imposition of antitrust remedies would reduce innovation instead of encouraging it.
Corporate acts deemed anticompetitive are those that foster competition not on the merits, and lead to insufficient distribution compensation.
Microsoft’s OS provided a platform with network and family effects, and its contracts, while exhibiting some arguably anticompetitive characteristics such as imposing penalties, also includes terms that provide exceptional value to its customers that, as in the case of AOL, tangibly improve their businesses. ...Show more

Summary

This paper talks about the theory of network externalities and its growing importance for modern industrial economics. Using the provisions of the theory, it is discussed, whether the practices used by the Microsoft company can be deemed uncompetitive, that allowed it to make supernormal profits…
Author : lafayettebauch
Using the Concept of Network Externalities in Detecting Monopolistic Practices as in the Case of Microsoft Company essay example
Read Text Preview
Save Your Time for More Important Things
Let us write or edit the essay on your topic
"Using the Concept of Network Externalities in Detecting Monopolistic Practices as in the Case of Microsoft Company"
with a personal 20% discount.
Grab the best paper

Check these samples - they also fit your topic

Microsoft Company Analysis
Microsoft does not sell complete solutions. The only hardware they currently sell is ergonomic keyboards, mice and game accessories. Their dominance comes solely from the software that they present. The management has always been focused on problem solving and finding unique solutions.
8 pages (2000 words) Essay
Detecting Circulating Tumor Cells using Flow Cytometry
The system has a disposable chip. This chip checks for cross contamination collect analyzed sample and to freely measurement. CTC is salient biomarkers for so many cancers. There are many systems for enumeration based on either EpCAM/CD326 which express tumor cell before microscope or RT-PCR.
6 pages (1500 words) Essay
Company Background - Microsoft Corporation
This essay explores Microsoft Corporation. The firm was incorporated in 1981 and it became public following an IPO on March 13, 1986. Today the company is currently selling Windows 8 operating system. Microsoft is the industry leader in the software industry due to the fact that they have the most popular operating system.
4 pages (1000 words) Essay
Monopolistic Competition. Concept, Advantages and Limitations
This essay focuses on the relative efficiency of the monopolistic competition, certain key characteristics of that type of market, its advantages to producers and customers. It is argued, that the firms operating in monopolistic competition can benefit greatly and reap benefits that it offers, but the customers do not benefit from it necessarily.
3 pages (750 words) Essay
The Concept of Externalities
Let us focus on the external factors that may cause the failure of market. But before digging into it, let's define what externalities are. According to a power point presentation of Thompson (2005), externalities are accidental costs or advantage that are forced on unsuspecting people and that result from economic activity initiated by others.
4 pages (1000 words) Essay
Detecting rogue access point using Omnipeek software to analyze the wireless network
The Open Systems Interconnect reference model formulated by the International Standards Organization (ISO), defines at least seven layers to enable communication through the network. These layers are the physical layer, the data link layer, the network layer, the transport layer the session layer.
21 pages (5250 words) Essay
Microsoft Case
According to Economides (2001), the first antitrust law that led to the proceedings against Microsoft is the fact that the company tried to monopolize the operating systems market by bundling all its
2 pages (500 words) Essay
Externalities
The trust is composed of 40 commercial office towers each valued at 5 billion dollars. The report will be designed evaluating the phenomenon as to whether a regulation in externalities would give rise to either positive or negative consequences. On the basis of the
6 pages (1500 words) Essay
Microsoft Company
Economic analysis – Microsoft Corporation, the leading producer of computer software and operating systems such as windows and others has its headquarters
4 pages (1000 words) Essay
Microsoft: a case study
It cost the company long working hours and much finances in developing the windows operating system. Consequently, there have been many debates on the patent rights granted to this company since
4 pages (1000 words) Essay
Hire a pro to write
a paper under your requirements!
Win a special DISCOUNT!
Put in your e-mail and click the button with your lucky finger
Your email
YOUR PRIZE:
Apply my DISCOUNT
Comments (0)
Click to create a comment