Landsburg has now blocked me from commenting on his blog and judging by the recent comments from others, he has confused more people than just me (whom he considers a moron for not grasping his deeply confusing version of welfare economics that changes with the direction of the wind and for using incorrect econ jargon).Many have called, but a few have been chosen by Professor Landsburg for their egregious failings (lack of enthusiasm for his attempt to resurrect the theory of predatory pricing). This was deleted by the not so good professor;
Since we have a well documented history of the word processor (and other IT products like spreadsheets and browsers) market, we can check to see if Steve’s theory explains what actually happened. Say;
‘…monopoly and competition differ in the level of prices, not in the way that they change price. However, if the market were moving from a less competitive to a more competitive market equilibrium, prices would be expected to fall during the transition. If Lotus and WordPerfect tried to use their large market shares to generate short run monopoly profits, and Microsoft didn’t, we would expect prices to fall as the markets stopped taking its cues from WordPerfect and Lotus and instead started to take their cues from Microsoft. Once the new regime was in place, prices should have stabilized at their new lower level, ceteris paribus.
‘If Microsoft believed that Lotus and WordPerfect lost their dominant position because they failed to act competitively, it might have chosen a competitive price even after it achieved a dominant market shares. That appears to be what has happened since there is no evidence of prices rising even after market shares above 99% are achieved, as in the Macintosh spreadsheet market, and this pattern of behavior on Microsoft’s part occurred in some other markets such as midrange desktop publishing.’Replaced with this by Landsburg;
You appear (from some of your posts in the earlier thread) to be shaky on a lot of the underlying economics. Let me suggest (and this is meant in the friendliest possible way) that your insistence on “realism” is hampering, not furthering, your understanding. The way to learn this stuff, for almost everyone, is to work through a whole lot of artificially simple examples that have stripped away complications to focus on one issue at a time.Iow, it may work in practice, but it's theory that really counts!