Micronopoly

Essay by super_fetusUniversity, Bachelor'sA-, April 2004

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Micronopoly?

Although by strict definition software giant Microsoft Corporation cannot be described as a monopoly, there has been much talk and controversy over this particular subject matter. There have been various complaints that Microsoft has used unfair business tactics to build an illegal monopoly and consequently has become the fifth largest company in the United States of America with a net revenue figure for the last financial year of around 26 billion dollars. Microsoft Corporation has been subject to extensive litigation for some years now, and to this very date is still battling in court to try and maintain their current procedures and operation of business which have been so profitable for them. The question; is the criticism of Microsoft well-founded?

First and foremost, monopoly must be defined. A firm can be classified as a monopoly if it is the sole seller of a particular product which does not have close substitutes.

A monopolistic situation arises due to an effect known as 'barriers to entry'. These 'barriers' ensure that other firms cannot enter the market in question as they are simply incapable of competing with the already established firm. The three known barriers to entry are as follows:

A key resource is owned by a single firm

The government gives certain exclusive rights to a single firm

Costs of production make a single producer more efficient than several producers

In the case of Microsoft, a key resource isn't necessarily controlled by the firm, they do not have exclusive rights to produce software and, although they are more efficient in production than much of their meager opposition, they are still not the sole producer of software products. However, Microsoft does have control over intellectual property, they possess the exclusive rights to produce and sell the Microsoft Windows operating system and in...