Tuesday, May 1, 2012

Anyone miss the monopoly?

In olden days (U.S. v. Microsoft) we were informed that unless the government stopped Microsoft and its Internet Explorer, all progress would come to a halt, thanks to path dependence through network effects.  Now, it's Microsoft scrambling to catch up and needs help to do so;

Under the partnership, Microsoft will invest $300 million in the subsidiary, giving the software giant a 17.6 percent equity stake in an area where it had been lacking presence: e-books. The subsidiary is valued at $1.7 billion. Barnes & Noble will own 82.4 percent.
In addition to the initial $300 million, Microsoft has committed $180 million over three years in revenue-sharing guarantees. It also will contribute $125 million over five years to help the subsidiary expand into international markets.
As part of the deal, Barnes & Noble will create a Nook application for Windows 8. Nook is the bookseller's e-reading device, coming in e-reader and tablet form.
 Just as Stan Liebowitz and Steve Margolis predicted, if there is monopoly in the 'new economy' it will be a series of monopolies that will still be vulnerable to competitors;
The misuse of economic theory for public policy purposes cannot be in the country's long run interest. Even if one does not like Microsoft, its CEO, or its products, it is still a mistake to use antitrust as an instrument with which to bludgeon Microsoft, since there is no telling where the misuse of antitrust will next appear. The high technology marketplace appears to be quite capable of disciplining any firm that does not address the needs of its consumers, as is demonstrated by the extraordinary rate of turnover of product leaders in these markets. Above all else, the theory that is alleged to underpin such antitrust action is a theory that, at best, is of limited applicability and, at worst, is simply wrong. Consumers, manufacturers, regulators and economists will all be better off when our discourse is based on theories that have empirical confirmation in the real world.

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