microsoft
The current Microsoft antitrust case, still in progress as this review is being written, has been both hailed and condemned as the most important antitrust action of the coming century. Its potential significance has been compared to that of the Supreme Court's 1911 Standard Oil decision, which not only applied for the first time the trust-busting power latent in the Sherman Antitrust Act of 1890 to break up John D. Rockefeller's Standard Oil Company, but of at least equal importance enunciated the rule of reason on which judicial interpretation of the Sherman Act continues to be based. While none of this conference volume's contributors develops this comparison, readers may come away from the book feeling that it is apt.; As noted in Lenard's introduction and overview, there was general agreement among the conferees that the Microsoft case did not indicate any need for revision of existing antitrust laws. Yet the book identifies a paradox. Today's computer industry has so many elements of natural monopoly--notably network effects and first-mover advantages--that the market will not work well if left to itself, yet it is far too complicated and fast moving to be regulated effectively. Antitrust is the only feasible policy option
, but unless applied with skill and discretion, it may do more harm than good. In particular, consumer welfare is more likely to be enhanced by policy initiatives aimed at keeping the industry open to the introduction of major new technologies that might challenge the dominance of incumbents than by policies seeking to promote price competition among existing firms employing established technologies.; The paper by Michael L. Katz and Carl Shapiro discusses the fundamental economics of software markets, focusing, not surprisingly, on network effects, but also identifying and discussing the effects of the high set-up costs and low--even zero--marginal costs of software, the durability of software systems, and their rapid technological change. This paper's treatment of network effects is sharply challenged in Timothy J. Muris' comment, which argues that network effects comprise a model for which very few, if any, valid empirical examples exist.; Janusz A. Ordover and Robert D. Willig confront the basic question of whether or not there is any role for antitrust in high-tech markets. After reviewing competing arguments, they conclude that antitrust may be crucial in protecting long-run competition in innovation and that this should be its primary objective. Their particular concern is with bottlenecks such as Microsoft's monopoly control of the operating system market, which is a crucial component of a broader system of computer use, including applications such as word processing and access to the Internet via browsers. They propose a three-pronged test to ascertain whether monopoly control of such a bottleneck exists and if so whether it is being used to exc
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Approximate Word count = 1122
Approximate Pages = 4 (250 words per page double spaced)
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