You have two options: 1. Select at least two published articles about a policy issue based on an economic point of view. Critique them from the perspective of this course. The articles do not have to...

Microsoft Antitrust issue
Microsoft is a software technology giant and one of the biggest corporations of the world.
But not all its success can be attributed to its prowess in software production. Like in all
usinesses software industry has had its share of manoeuvring and hand wringing and
Microsoft epitomizes how far a company can to go consolidate its position in an industry it
already dominates and kill any sign of competition.
Background
Microsoft dominates the software industry with its ubiquitous Windows operating software.
It has a market share close to 90% worldwide in this important software category. The
company over the years has used this to extend this dominance in other categories by
employing any means, i
espective of whether ethically or legally acceptable.
Microsoft in late 90s and early years of the millennium tried to create an environment in the
software industry where the entire ecosystem revolved around its overarching operating
software. In order to scuttle any competition that it may face Microsoft denied sharing its
interface information thus effectively preventing any other software vendor in making
software that can integrate and thus run seamlessly on computers which use Microsoft’s
operating system. This gains significance as it virtually rules out entry of any player in the
software market as most of the computers globally use the Microsoft Windows OS.
When some companies were able to make compatible products on their own it wasn’t the
end of the road as that was when they had to face the giant called Microsoft, which, with its
immense market power was ready to go any lengths to kill an impending competition.
Software industry is markedly different than other traditional industries as far as pricing and
costing of products are concerned. There is no industry which manifests the tenets of
economies of scale as much as software industry. Here most of the product costs are fixed
which were incu
ed during the research and development stage. After that variable costs
are minimal, as less as 10% of the product cost.
This has a lot of implications. First of all this implies that once a player has established itself
in the market and has recouped its production cost it can go to any length in cu
ing the
entry of new players by driving the prices to unacceptably low prices, till its supremacy has
een established. And all this can be done without causing a significant dent in its profits.
Take for instance the personal computer industry. With 20 percent gross margins, a 5
percent reduction in price can lead to a 25 percent reduction in gross profits. However, with
a software gross margin of 90 percent, a 5 percent reduction in price only leads to a 5.5
percent reduction in gross profits. The PC vendor needs an unrealistically high price
elasticity of 6.7, just to make up for the price erosion. However, the software vendor can
eak-even with a price elasticity slightly above 1.0 - a much more realistic assumption.
Problems with Monopoly
The major economic problem with monopolies is the resulting economic...