Microsoft's Pricing of Windows: A Reply to Reddy, Evans, Nichols, and Schmalensee
Despite arguments to the contrary, PCheterogeneity may go a long way towardexplaining why the price ofWindows might be as low as it is.
Operating System Prices in the Home Pc Market
Because the demand for OS is a derived demand revealed through the demand for PCs and because its elasticity is relatively small, the profit-maximizing price of DOSsWIN that would result from a static equilibrium is much higher than the observed price. We investigate this assertion empirically by fitting a differentiated-products model of the home PC market to panel data of all PC brands sold in the G7 countries over the period 1995-1999. The results confirm that the low value of the aggregate elasticity of demand for PCs is the result of differentiation and substitution among PCs. Copyright Blackwell Publishing Ltd. 2005.
United States v. Microsoft: An Economic Analysis
In May, 1998, the U.S. Department of Justice filed suit against the Microsoft Corporation claiming a number of violations of Sections 1 and 2 of the Sherman Act. The case was tried from October 19, 1998 through June 24, 1999. Judge Thomas Penfield Jackson ruled as to the findings of fact on November 5, 1999 and conclusions of law on April 3, 2000. As this paper is drafted, the remedy phase of the trial is about to begin. If the case does not settle, the appeals process will follow. This paper presents perspective and commentary on the economic issues from the viewpoint of two economists who were active in the case. Fisher was one of the U.S. Government's economic witnesses at the trial, and this paper is based in part on his testimony. Rubinfeld was Deputy Assistant Attorney General (DAAG) for Economics in the Antitrust Division during much of the investigation, and DAAG and then consultant for the U.S. Government during the trial. Our roles as testifying expert and chief economist at the Antitrust Division, respectively, carry with them the advantage of seeing the issues from the inside as participants, and the disadvantage that one's perspective is inevitably affected by one's own viewpoint. Because our goal is to explicate the merits of the Government's case and to highlight important issues, we are hopeful that the advantages will outweigh any disadvantages. Most of what follows summarizes our views at the time of trial; subsections that contain retrospective commentary are starred.