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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?"
Ever since Microsoft entered the desktop OS market, Linux felt so threatened that it's been giving away free source codes!
Rock that crushes, Paper & Scissors that don't matter.
No, they don't.
Are they the cause of cheaper software? Yes, they are.
this relationship looks correlational rather than causal. as the market for a certain type of home software expands, the price goes down. the same market force also attracts microsoft. both are the result of a common cause: the market.
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"I'd really like to see some on-line evidence of this. Has Microsoft competition in office suites really cut prices there?"
;)
Oddly enough... the price dropped 100% in the office suites arena.
That green slime had it coming.
Well this is ignoring other factors.
When you look at it you will see MS enters markets that already exist. They pick and choose and go in when things are getting popular
The thing this article misses is that also when things get popular open source people come in too and write their own versions for free. And they do it better than propriterary software usually.
Which is the real thing that drives prices down.
High margins and high profits only exist in really tiny niche markets that dont have many competitors.
Microsoft is just entering markets that also other competitors such as open source teams are entering and thus it is not just microsoft who is making prices lower. Somebody has not thought this through properly.
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A monopoly produces and prices according to it's production possiblities curve (I think that's what it's called) whereby it produces the most for the least cost and charges to maximize profits. But because there is little competition, they are able to charge less and make more money. Thus, any company trying to compete with the monopoly would have to lower its own prices, reducing its profits, just to keep up. Correct me if I'm wrong; it's been a while since I took economics.
Esoteric reference.
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!
As to the pricing thing, well. Where I lived in England (really England, not meaning "any part of Britain"), Stagecoach (a bus company) rolled into town and set their prices at zero until all the other bus companies went out of business. Then they stuck their prices up to something slightly less than the old prices.
Sure, prices were lower but in getting there all competition had been destroyed and Stagecoach is no longer (especially since they got control of the trains too) under any pressure to ensure quality. So they don't.
It's the same with Microsoft: after they crap all over a market to kill all the competition they simply sit around and look for new ways to screw the trapped clients. Sure, the prices are lower, but quality is non-existant and customer service is some sort of joke.
IE is a good example: until Firefox came along it had basically been left to rot. It still doesn't actually manage CSS level 1 or 2 to anything like a decent level, or display PNGs correctly. Sure, browers are bloody cheap (free) but if you'd been waiting for MS to innovate you'd have been dead and buried before it happened.
TWW
"Encyclopedia" is to "Wikipedia" what "Library" is to "Some people at a bus stop"
The existance of MSPaint doesn't seam to be making Photoshop more affordable.
UK Laptops
And why expect the prices to go up?
If the prices go up, then it becomes reasonable for another competitor to enter the market again, restoring competition. Microsoft isn't the only company with a war chest.
Driving your competition out of the marketplace isn't a PERMANENT condition - if it took below-cost prices to take over the market, it'll take below-market prices to keep control of the market.
Prices will go up not because competition got eliminated, but because you can't maintain those prices forever. The consumer benefits as long as manufacturers try though.
paintball
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.
After the small companies close down, because of the lower prices from the big company, the prices are increased to higher than the small companies had before the big company went into the area!!
The profit from the high prices is used to undercut small businesses in the next area the big company takes over...
Now, replace a geographic area with a type of application (spreadsheet, writing, etc).
When Microsoft goes into a new area, they move their investments there. The speed of development in the old area goes down. (But while Msoft takes over an application area -- the speed and development is faster!)
The development speed for new revolutionary features of Internet Explorer or Office isn't high...
When there is competition in an area taken over earlier, lots of developers (paid by the monopoly profits from some other controlled area) are moved back into that place -- until the threat is gone.
So now, with Firefox, there will be development on Internet Explorer.
At any given time, it's better to use the monopolist product -- but in total it's never good for anyone, except for the monopolist.
Karma: Excellent (My Karma? I wish...:-( )
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.
This article seems like one of the worse excuses for journalism I've seen in some time. The author writes:
Competitors will always whine and cry about how the price-cutting, product-improving, and customer-satisfying practices of their more successful rivals are "unfair." This in fact is the modus operandi of antitrust: The antitrust laws provide a means by which sour-grapes competitors can achieve through politics what they fail to achieve in the marketplace.
This is a dreadfully dishonest characterization of anti-trust laws. Microsoft wasn't accused of success through fair competition. They were accused of a series of dirty tricks that have nothing to do with competing on a level playing field. These tricks include giving their customers discounts if those customers would design their own web sites so that non-MS browsers wouldn't work with them, and pushing PC makers into deals where they had to pay for MS licences, even for machines that were to be loaded with non-MS operating systems.
Neither economists nor politicians nor policy wonks are capable of deciding the most "efficient" size or configuration of any business enterprise. As Ludwig von Mises once explained, "The question to be decided is: Who should determine the size of the enterprises, the consumers by their striving to buy what suits them best or the politicians who know only how to tax away and to spend?"
This is a strawman argument. Anti-trust laws aren't designed to limit the size or market share of companies; The are designed to limit companies from using monopolies or near-monopolies unfairly to exclude competition. As such, they are only targetted at companies that actually have monopolies or near monopolies. But I supposed it's easier for the unscrupulous to simply make up non-sense positions for their adversaries and to claim that their adversaries hold those non-sense positions than it is to argue against the positions their adversaries actually take.
By adhering to this false "maxim" antitrust regulators are attempting to supersede the informed judgment of millions of consumers
Even if we assume, for the sake of argument, that most consumers are informed enough to exercise informed judgement, those consumers can only use there judgement to decide among the choices they actually have. If I offer an OS at the same price as MS's and if customers can choose which one to purchase, customers can make a simple judgement about the qualities of the OSs. But if MS has strong-armed vendors into making my customers pay for MS-Windows in addition to my OS for any machine they buy, even if my OS is the only one loaded, then the consumer's choice isn't just about OS qualities, anymore.
Third, the government is clearly unconcerned about consumer welfare in its prosecution of Microsoft: In Judge Thomas Penfield Jackson's November 1999 "Statement of Fact" he devoted a mere five out of 412 paragraphs to the issue of consumer welfare.
This is just plain stupid. The point of Judge Jackson's "Findings of Fact" document was to describe the facts of the case, and not to concentrate on the social consequences of the facts. And in any case, the proper focus of a Judge is on the law and on the facts of a case. The author of this article is either showing his ignorance or his dishonesty.
He rests his case on the lame notion that, in his opinion, the company's management had "anticompetitive motives." Economic analysis may not be Mr. Litan's strong point, but mind-reading apparently is. He claims that such a malevolent "intent" has harmed Microsoft's competitor Netscape by keeping it from competing in the Web browser market. In fact, Netscape has distributed more than 150 million copies of its browser since 1995.
The author completely misses the point, and we are left to wonder if he did more than skim the "Findings of Fact" document. MS used the browse
I wish MS would enter the fields of GIS / Mining / and CAD software.
If the trend is true, then the days of spending anywhere from 4 to 80 THOUSAND dollars for a ONE seat license on these specialty softwares would end.
You think the MS monopoly is bad? you pay nothing compared to what Autodesk, ESRI, and others charge.
George Bush + Linux = "I will not let information get in the way of the fight against Windows"
I think that Microsoft *has* caused prices to go down dramatically to the point where the *only* viable competition can be open source. Here is my reasoning (I am a businessman, not an economist but the two have some overlap sometimes).
When you develop proprietary software, you absorb the entire cost of R&D as well as marketing in advance, and then you sell licenses in order to make that money back, along with a profit margin. The actual boxed sets only cost a few dollars to produce, but the research and development is where the major costs are, and these dwarf the production costs pretty heavily.
So, if you can sell twice as many of something than your competitor, you can actually sell the product at a lower cost than your competitor's break even point. I believe economists call this "economy of scale." You can even do this at the same that you use some of the profits to subsidize research and development of other projects. Whether this is predatory or not I will leave to lawyers and the courts (I suspect the answer is "it depends").
Now, if you are a company which is smaller than MS, you cannot compete with Microsoft on the basis of volume. So Microsoft is able to develop (often better) software faster because they already have achieved scale in these markets. The other companies cannot compete and they slowly sink into obscurity (re: Corel, etc). Some of this may be predatory, and the rest is the fact of the market. So, the result is that you cannot beat Microsoft at their game if you play by their rules. They are bigger and they will *always* win because they can make money on a more marketable product at a lower price than you can.
So, what about competition? Is there no hope? Actually there is. Open source actually is more efficient at spreading the development effort around so that needed features get added with less general expense. Therefore the pace of popular open source projects easily dwarfs Microsoft's, the total cost of ownership is lower, etc. Linux, OpenOffice, Mozilla, etc. actually beat Microsoft at their own game by reinventing the rules (which is what all successful businesses and projects do anyway). So open source will reduce costs even further to the point where Microsoft cannot be profitable and compete.
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