Winners, Losers & Microsoft: Competition and Antitrust in High Technology

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Summary: An incisive book shedding light far beyond the MSFT case
Review: This book is unfortunately titled as it is really primarily about bringing real data and rigor to bear on many of the conventional "stories" about the economics of the new economy, rather than dwelling on the Microsoft antitrust situation. Clearly, the new economy tends to be characterized by more network effects, increasing returns to scale, and general "winner-take-all" effects than the historical economy. However, certain stories about early lock-in effects of technologies that are inferior, but that by luck got the early lead, have been uncritically passed from author to author. Examples are the QWERTY keyboard, VHS vs Betamax, Windows vs Apple, etc. Liebowitz and Margolis show that most of these stories do not hold up under close examination -- that in fact, these are not examples of the market failing to take the "right path". Actually, the market generally seems to get it right. This book is also the best we have seen in its treatment of the overall economics of information technology standards.

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Summary: Gates and Rockefeller - not so bad, huh?
Review: When enormous companies are extremely successful it attracts a great deal of attention. Usually this attention is centered around fear. People are afraid of companies being too successful, and making too much money. The fact that Microsoft has risen to such a high status in today's market is terrifying to some people. They look at Microsoft and assume that just because they are very dominant it is a sure sign that they are going to try and drive competitors out and then raise all the prices. They accuse them of crimes such as, Predatory Pricing, Linking or Bundling, and Collusion. They do this instead of looking at the company for what it is, a very efficient, well running, machine. Many people have compared Bill Gates with John Rockefeller saying that there is not much difference. Well, if that is going to be said it should be known that even Rockefeller's most harsh critic Ida Tarbell described his company as "a marvelous example of economy." Basically Gates and Rockefeller do have something in common. They both were able to run a business very productively, efficiently and innovatively and they will both be punished for it.
When you look at the Microsoft situation you have to ask the question, who have they hurt? The answer to that question is nobody. As Stan Leibowitz and Steve Margolis state in their book, "Winners, Losers, and Microsoft," the effect that Microsoft's competitiveness has had on the market is in fact a huge reduction in prices and a great improvement of quantity and quality of computer products (Ludwig). This is the exact opposite of what a monopoly is supposed to cause. Going into more detail, it can be seen that Word processing prices were on the rise before Microsoft developed their Word program for Windows in 1989. This alone caused prices to drop from $300 in 1990 to $50 in 1997 (Ludwig). Also Microsoft had a positive effect on personal finance software when they came out with their Microsoft Money program. This caused finance software to drop from $100 in 1990 to $20 in 1991 (Ludwig). It has also been proven that during Microsoft's existence, "the cost of information processing to the consumer has plummeted so far today that it is now one hundredth of one percent of what it was in 1975." It's interesting to note that Microsoft was started in 1975.