Getting the Facts Straight on Microsoft: A Reply to Stelzer

Competition Policy and Antitrust

Article Snapshot

Author(s)

Albert L. Nichols

Source

AEI-Brookings Joint Center Policy Matters 01-13, May 2001

Summary

This short piece asks whether Microsoft’s growth came about by fair or foul means.

Policy Relevance

Policy makers should note that a firm's growth will often help consumers, and that competition can bypass a dominant firm.

Main Points

  • Some contracts between Microsoft and personal computer makers in the early 1990s asked computer makers for “minimum commitments”  to Windows, and to pay for a license for Windows on every computer sold.
 
  • Expert consensus is that this had little impact on Microsoft’s growth. Testifying for the Department of Justice, Nobel Prize-winning economist Kenneth Arrow said it made only a “minor contribution”
 
  • Microsoft’s decision to “tie” its browser to Windows helped consumers; if browsers and operating systems were produced by separate firms, neither would reduce prices of one to sell more of the other.
 
  • The Internet hosts many new competitors to Microsoft, including Sun, Oracle, AOL-Time Warner, and IBM.

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