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It is also worth noting that as time moves forward there is less of a downward sloping demand curve in software. This means that the demand for browsers is less likely to decline as price increases over time, as more people go online and the technology becomes ubiquitous. If there was a downward sloping demand curve, the monopoly firm would be prevented from increasing prices infinitely because it would lose customers doing so. The worry was that as the demand curve flattens, Microsoft would simply earn more profit from its monopoly position and thus consumers needed protection.
Economically, there are few conditions where a monopoly would be considered better than a competitive environment. Natural monopolies are an exception, although there is some disagreement as to what precisely constitutes a natural monopoly. Something like a military or a police force, or an electrical grid, could constitute a natural monopoly where it is cheaper to provide a service under monopoly conditions because of the incredibly high fixed costs associated with running...
An interesting case of monopolies providing superior products at a lower price is in the insurance industry. The costs imposed by competition (the need to advertise, the need to earn a profit margin) increased the cost to consumers, while decreasing the quality of the product. This example applied to government-run insurance schemes, where the profit motive did not exist, and is a limited example in scope, but does demonstrate that there are instances were monopolies are better for some consumers. Such a situation would not apply to a monopoly held by a private firm like Microsoft that did seek monopoly rents to increase profit.
Works Cited:
Epple, K. & Schafer,
R. (1996). The transition from monopoly to competition: The case of housing insurance in Baden-Wurttemberg. European Economic Review. Vol. 40 (3-5) 1123-1131.
McCullagh, D. (2000). Judge's conclusion: MS guilty. Wired Retrieved January 22, 2012 from http://www.wired.com/politics/law/news/2000/04/35378
Works Cited:
Epple, K. & Schafer,
R. (1996). The transition from monopoly to competition: The case of housing insurance in Baden-Wurttemberg. European Economic Review. Vol. 40 (3-5) 1123-1131.
McCullagh, D. (2000). Judge's conclusion: MS guilty. Wired Retrieved January 22, 2012 from http://www.wired.com/politics/law/news/2000/04/35378
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