The Microsoft Case Essay Example for Free

The Microsoft Case Essay Why was Microsoft investigated for antitrust behavior? Microsoft is a huge, established, well known computer software manufacturer. They were investigated for antitrust behavior after allegedly abusing their powerful position as the leading suppliers of computer operating systems. Microsoft developed a monopoly market structure because the software which they created was only compatible with Microsoft Windows operating systems. Back when the internet was introduced to the public, Microsoft provided Internet Explorer for free, bundled with Windows operating systems. This was a strategy to eliminate any competitors so they were obviously not perfectly competitive, therefore their case involved imperfect competition. Microsoft’s monopoly was protected by the applications barrier to entry so many competitors feared to try to enter the market. Microsoft also had the ability to increase their prices above marginal costs without losing many customers so they were the price makers, and they also had market power. With that being said, some people may say that Microsoft was a pure monopoly because they were the sole producers of the computer software market and there were no close substitutes. On the other hand, some may say that Microsoft was a natural monopoly because they earned their powerful position by over driving their free market competitors. Before Microsoft grew so big, there were some economic observers that claimed that economies of scale would give Microsoft an unassailable lead that would result in monopoly. (Economides, 2003) I agree that Microsoft was trying to gain monopoly power in the computer software industry due to all of the evidence. Microsoft totally dominated the computer software industry for which they had great strategies to do so. Monopolies can cause many negative effects on our economy such as higher prices, less jobs, it can put other companies out of business, and it can cause producers to be intimidated to enter the same industry. Monopolies can also cause productive inefficiency, allocated inefficiency, diseconomies of scale, and x inefficiency. However, a monopoly can be a good thing, especially for a business. Being the leader or the giant of a particular industry can make owners, managers, and employees feel  very secure with their company. Although a monopoly can cause overpricing, it can also cause price reduction for which would cause other companies to not be able to compete. A monopoly can also be a good thing because the high profit can be used to fund research capital investment spending. Lastly, economies of scale, international competition, and they have the power to be the price makers.