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Does Microsoft Cause Lower Software Prices?
AngusSF writes "OK, slashdotters, , so is this FEE article Antitrust Benefits Consumers? It Just Ain't So! true?" AngusSF quotes from the article: "... as Stan Leibowitz and Steve Margolis have shown in their book, Winners, Losers and Microsoft, in virtually any market that Microsoft has entered (financial software, spreadsheets, etc.), the effect has been a dramatic reduction in prices and an expansion of output and innovation. Software products that do not compete with Microsoft's products fell in price by 12 percent from 1988 to 1995, but by 60 percent where there was competition from Microsoft.", and writes "I'd really like to see some on-line evidence of this. Has Microsoft competition in office suites really cut prices there?"
The classic behavior is that a company drives down prices to get rid of the competition (if its internal costs allow that), then raise prices after the competition is gone.
While MS has competition within a market (Word Processing comes to mind) their prices are very low. I recall Word selling for $99 back when it was competing with WordPerfect. Today, with essentially zero competition, it's $299.
Of course the counter-argument is Excel vs Borland's Quattro Pro: Excel was at $495 and QPro at $295, but despite great QPro reviews vs Excel purchasers thought QPro was not in Excel's league because it was too cheap!
A good example of how Microsoft is effecting prices is in the consumer media formats.
Microsoft undercut MPEG-4 consortium's prices by offering licensing charges of 10 cents per encoder for its codec.
The MPEG-4 gropup charges 25 cents.
This led to protests from the MPEG-4 group including attempts to belittle Microsoft's codec in the press.
I'm not an economist, but I think this is a classic monopolist example.
Consider an area with many small bakeries. A big company goes in and opens bread shops with lower prices so the small shops have to close.
Good for the consumers? No.
If this were true, that would suggest that Walmart is bad for consumers. From many economists' points of view, this is simply not true; Walmart brings and maintains low prices.
The negative effect of Walmart, Microsoft, and other monopolists is that while the prices of goods often go down, the diversity of local vendors dimishes, and the remaining local businesses are mostly no longer owned by local businessmen. Locally owned businesses are driven out of the economy, so the money the local people bring into their local economy goes right back out of the economy through the almost always non-local monopolist.
People who view monopolies as positive don't view the annihilation of successful local economies as negative. This is the common approach in US economics, where the significant measures of an economy are considered to be average wealth, and average global quality of life, rather than median wealth and quality of life.