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The case against Microsoft is based not just on bad economics but on a fundamental misunderstanding of governments decision-making role when it comes to market operations This misunderstanding has led to an attack on one of the USs most successful firmsIt is difficult to measure consumer harms much less harms that may only occur in the future A common misconception about antitrust law is that its purpose is to ensure fair competition Thats not true antitrust laws purpose is to protect consumers If fair competition maximizes their welfare so be it if monopoly maximizes their welfare thats what the antitrust laws provide forIts not clear that Microsoft has a monopoly in the first place Past Microsoft customers are not a captive market as the Department of Justice portrays them Rather Microsoft must continue to add features and functionality to its products to get its Windows 95 consumers to become Windows 98 and beyond consumers Consumers are free to change operating systems at any time There are such alternatives as Linux with the graphic interface the Mac OS but the point is that even if there were none Microsofts ability to raise prices is strictly limited by the mere possibility of such an alternatives emergence into the marketPredatory pricing that is the practice of lowering prices to drive out competition thus enabling massive price increases later Well maybe There are compelling academic theories that question the possibility of predatory pricing in a free market but economists universally agree that one component of predatory pricing must be high entryexit costs If the competition can enter and exit the market at very low cost driving them out serves very little purpose since as soon as you the monopolist get around to raising your prices theyll come right back in and compete those profits away The purpose of this discussion of pricing strategy is to show that Microsoft despite its size still fears its competitors both the ones it
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