By Thomas M. Lenard (auth.), Jeffrey A. Eisenach, Thomas M. Lenard (eds.)

Do the antitrust legislation have a spot within the electronic financial system or are they out of date? that's the query raised via the government's criminal motion opposed to Microsoft, and it's the query this quantity is designed to respond to.
America's antitrust legislation have been born out of the commercial Revolution. rivals of the antitrust legislation argue that no matter what benefit the antitrust legislation could have had some time past they've got no position in a electronic economic system. fast innovation makes the buildup of marketplace energy essentially most unlikely. Markets swap too speedy for antitrust activities to take care of. And antitrust treatments are unavoidably regulatory and consequently threaten to `regulate business'.
a unique view - and, mostly, the view awarded during this quantity - is that antitrust legislation can and does have a huge and confident position to play within the electronic financial system. The software program company is new, it truly is complicated, and it's speedily relocating. research of industry definition, contestibility and strength pageant, the position of innovation, community externalities, expense constructions and advertising channels current demanding situations for teachers, policymakers and judges alike. comparing buyer damage is complex. Distinguishing among unlawful behavior and brutal - yet valid - festival is usually tricky.
Is antitrust research as much as the problem? This quantity means that antitrust research `still works'. In stark distinction to the political rhetoric that has surrounded a lot of the talk over the Microsoft case, the articles provided right here recommend neither that Microsoft is inherently undesirable, nor that it merits a de facto exemption from the antitrust legislation. in its place, they provide insights - for policymakers, courts, practitioners, professors and scholars of antitrust coverage all over - on how antitrust research may be utilized to the enterprise of creating and advertising machine software.

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Extra resources for Competition, Innovation and the Microsoft Monopoly: Antitrust in the Digital Marketplace: Proceedings of a conference held by The Progress & Freedom Foundation in Washigton, DC February 5, 1998

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1 Applying the Merger Guidelines to Horizontal Software Mergers Before looking at specific mergers, we first discuss how the Guidelines, which apply to all industries, are implemented in software markets, in the light of the fundamental economic characteristics of software markets that we have enumerated above. We have already discussed how markets are defined, shares are measured, and entry conditions are assessed in software markets. This leaves estimating the likely competitive effects of a proposed software merger.

With a high gross margin, each unit sale lost due to a price increase entails a significant reduction in profits. This consideration alone leads to relatively broad markets, since even modest lost sales will make a SSNIP unprofitable. However, these same high gross margins tend to go hand-in-hand with inelastic demand, which implies that few unit sales would in fact be lost were prices to rise. Finally, the dynamic nature of software markets means that the market definition exercise itself must be forward-looking.

How are we to evaluate market shares in the software industry? 1 After all, a software market with four equal-sized firms, and thus an HHI of 2500, would be so classified. An open question is whether, at least for mergers, the software industry should be thought of like the automobile and chemical industries, where mergers between two companies with shares of 15 percent to 20 percent each are borderline antitrust violations, or the defense industry, where mergers between two of three remaining suppliers are both commonplace and often encouraged by the leading customer, the Pentagon.

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