It has proved that Microsoft Corporation can be regarded as sole seller of the Operating System with negligence of other smaller competitors. Hyman & Kovacic (2004, p.25) defined the monopoly through Market power perspective, “when sellers have the ability to profitably maintain price above competitive levels for a lengthy period of time,” which implies sellers has market power over buyers. In addition to market power, no close substitutes should be important determinant in monopoly definition.
2.0 characteristics of monopoly
Firstly, Microsoft has possession of advanced technology and highly educated staff. Gaudet & Lasserre (1986,p.413) implied monopoly firm has more accessible to possess key resources than smaller competitors due to large economy scale that results in that Average total cost has decrease trend. Appendix shows the ATC trend of natural Monopoly.
it is easy to see marginal cost of Operating System product is almost zero, consequently, the total cost will decrease as output increases.
Secondly, Copyright Law of the United States clearly gives a Microsoft’s priority and protection, consequently, it is easy for Microsoft to set barrier for new entrants step into the industry, Cawley & Kenkel (2010, p.517) also showed the monopolist have aggressively made effort to block other firms by exclusive rights provided by government. Thirdly, there is only one seller in the market, consequently, Microsoft demand curve represents the downward-‐sloping market curve, but there is important point, Microsoft’s marginal revenue is still less than the price. Chen & Schwartz (2013,p.519) calculated that marginal revenue is less than price and Average Total Revenue. Appendix B showed the monopoly firm Marginal revenue and Demand curve.
Finally, it is hard to judge whether Monopoly is good method to organize the market. From customer standpoint, it will reduce their customer surplus that results in denied attitude for monoploy, but from firms perspective, they have more profit due to increase of supply surplus. Appendix D show deadweight loss due to monopoly market.
Lee & Tollison (2010, p.86) implies the deadweight loss represents the…