Sunday, March 14, 2004

More on Microsoft's Antitrust Mess

CNN reports that the "EU set to recommend sanctions against Microsoft". As suspected by those "in the know" the EU report appears to recommend that Microsoft offer a MediaPlayer-less version of Windows. The theory, I suppose, is that this is the new locus of competition in the software industry. . . From one perspective, I guess this makes sense, since media-playing exhibits huge network externalities (since it is difficult to port media to several different players, and companies would rather just offer one type of file and be done with it, so media-providers will just go with whatever consumers are using...) -- so whoever gets the biggest share of the market will dominate into perpetuity. The EU wants to keep Microsoft from getting this monopoly. In theory that might be good, if the EU believes that the alternative to Microsoft's monopoly is competition, but given the strong network externalities, it seems more likely that one company is destined to dominate the market. That said, perhaps we're better off having that one company be Microsoft (the theory being that it is better to have one monopolist than to stack monopolies on top of each other, an inefficient result known as double marginalization).

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