Yes, I think that you really captured the rationale for Microsoft's behavior. Good job.
As far as the devil's advocate part, well, I agree wholeheartedly that potential competition may keep Microsoft's market power in check. The question is--how much check is check? My standard problem with economic theorists, especially right wing theorists, is that they never place constraints on how long it takes for market forces to correct things. They only look at asymptotic behavior while we have to struggle in this world. So Microsoft has to price Windows under, say, $300 per copy in order to keep a massive consortium from banding together and replacing Windows. Big deal. Meanwhile, absent their predatory conduct, perhaps that Windows price would be $5.
Consider Kempin's internal memo about Intel where he worries that Intel might create an Operating System and sell it for $1. But then says they won't do it because it will cost too much to enter the market. Consider the cost of the Linux Operating System-- nothing, but you can pay $50 for more support than Microsoft will give you for $500. Yet Linux is simply not a threat to Windows in the near term (despite those leaked memos, which now I believe were purposely leaked). In other words, the barriers to entry are a far greater cost and threat then the cost of developing the operating system itself.
Finally, consider the fact that if Microsoft doesn't have a monopoly because some companies could band together and spend a few billion dollars to enter the market, then no monopoly has ever existed because you won't find any market that can't be entered for a few billion dollars. |
