- May 20, 2020
Monopoly at Microsoft Corporation
Monopolyat Microsoft Corporation
MicrosoftCorporation Monopoly Profile
MicrosoftCorporation is a multinational company headquartered in RedmondWashington. The company is a global leader in the development,manufacture, licensing and the sale of computer software. It supportsa range of computer software across the globe with a market share ofover 90% of the software market. The huge market share has ensuredthat the company operates as a monopoly due to its market dominance.
Overviewof goods produced by Microsoft
Thewindows operating system is one of the major products produced by thecompany with almost every computer in the world using it. Itcontinuous to advance with time with an aim of counter checking theefforts made by other players in the operating system market.Microsoft office too is another product that is produced by thecompany and widely consumed by many organization due to its differentfeatures. The company produces more than 90% of all operating systemsused globally.
TheMicrosoft share is large something that makes it operate like amonopoly. It has the ability to set high artificial prices for itsproducts given it has no serious competitors. It has also a chance ofcreating a scarcity of its products thus driving the prices(McKenzie& Lee, 2008). Legally monopoly can exist when a firmpushes competitors out of the market through hoarding supplies,slashing prices, mergers, and intimidation. In the recent past,Microsoft has been characterized by such acts with a sole aim ofgaining sole control of the global operating system market.
Determiningthe price and quantity of outputs
Microsoftuses price discrimination in marketing and selling of its products.It sells to different types of buyers depending on their income,segment, and social class. Though the products are different theyplay the same role to the target customer. One of the notableexamples is windows 7 operating system which has several versionssuch as windows 7 professional for business and windows 7 ultimate.The prevailing difference in prices is due to profit motive and haveno connection to production costs in the different versions. Windowsis also sold under different edition with the consumer marketsattracting lower prices as compared to the enterprise market.
Microsoftis not afraid of losing customers to its competitors and thus setsthe prices of its products significantly higher than the marginalcost. This allows the company to achieve significantly higher pricesthan those found in competitive markets. This profit gained is oftenreferred to as monopoly profit.
Fig.1:monopoly profits at Microsoft Inc.Courtesy:https://www.google.com/imgres?imgurl=http%3A%2F%2F2012books.lardbucket.org%2Fbooks%2Fmicroeconomics-principles-
Welfareimplications of consumer surplus
Thoughextra profits gained by Microsoft are ploughed back to the economyonce they are shared to the various shareholders, it is worthadmitting a loss of welfare to the society. This loss occurs when aparticular market is dominated by a monopoly rather than competitivefirms interacting together to competitively. The Federal TradeCommission serves to regulate trade in the United States and onseveral occasions has reviewed the manner in which Microsoft conductsbusiness.
Fig.1 revenues and cost at Microscope Inc. Courtesy:www.economicsonline.co.uk
Microsoftis likely to remain a market leader in the production of operatingsystems triggering small competitors to push the corporation todeclare market dominance. If Microsoft will declare market power thenit will continue enjoying its monopoly status without legallitigation by competitors.
McKenzie,R. B., & Lee, D. R. (2008). In defense of monopoly: How marketpower fosters creative production. Ann Arbor: University of MichiganPress.