Winners, Losers, & Microsoft: Competition and Antitrust in High Technology

Have the antitrust actions by the Department of Justice against Microsoft and other firms really intended to protect consumers, or are they politically motivated attempts to help competitors achieve what they could not achieve in the marketplace?

Can dominant companies in a market, such as Microsoft, "lock in" inferior technologies and thereby stifle innovation and would-be competitors?

Do "network effects"—the fact that some products, such as telephones and fax machines, increase in value as more people use them—result in monopolies even if dominant companies do not seek to create monopolies?

Do the current antitrust laws discourage entrepreneurship and innovation?

Will the robust high tech competition and tremendous technological advances of recent years continue if government steps up its antitrust actions?

Winners, Losers & Microsoft addresses such questions and sheds light on the real workings of the high tech markets. Through extensive research and insightful analysis, Professors Liebowitz and Margolis shatter many long-held beliefs about competition in the high technology industries. Among their surprising findings:

• Software prices fall dramatically in markets where Microsoft is a major player, but prices show no strong tendency to fall over time if Microsoft is not a factor in a given market.
• Claims that dominant but inferior technologies can “lock out” better competitive products are not supported by the data. This not only applies to software, but also to other technology markets (i.e. VHS vs. Beta video recorder battles).
• Superior products tend to dominate in high technology, even if inferior products are backed by lots of money. For example, Intuit’s Quicken has dominated Microsoft Money for several years despite intensive efforts by Microsoft to promote Money. And AOL has significantly increased its market share in recent years even through Microsoft incorporated software for the Microsoft Network into its Windows operating system.

Liebowitz and Margolis demonstrate how a high-tech company can go from a dominant market leader—as Lotus once was in spreadsheets—to an also-ran with astonishing speed. They show that free markets in high technology do a remarkable job of continually delivering better products at lower prices to consumers.

Winners, Losers & Microsoft makes a compelling case that the real danger to American high technology leadership is a too powerful, too intrusive government which believes it knows consumer preferences and needs better than they do. This book is a cogent, tightly argued rebuttal to frequent calls for greater government intervention in the high technology markets.

Stan J. Liebowitz is a Research Fellow at the Independent Institute and Ashbel Smith Professor of Economics and Director of the Center for the Analysis of Property Rights and Innovation at the University of Texas at Dallas. He received his Ph.D. in economics from the University of California at Los Angeles, and he has taught at the North Carolina State University, University of Chicago, University of Rochester, and the University of Western Ontario. Professor Liebowitz is the author (with Stephen Margolis) of the widely acclaimed book, Winners, Losers & Microsoft: Competition and Antitrust in High Technology, as well as the books and monographs, Re-thinking the Networked Economy, Why Health Care Costs Too Much, The Relative Efficiency of Private and Public Broadcasting in Canada, The Impact of Reprography on the Copyright System, and Copyright Obligations for Cable Television: Pros and Cons.

Stephen E. Margolis is a Research Fellow at the Independent Independent and Professor and Chairman of the Department of Economics, College of Management, North Carolina State University. Professor Margolis received his Ph.D. in economics from the University of California at Los Angeles, and he has taught at the University of Michigan, University of Western Ontario, University of Arizona, Harvard University and Duke University.

Jack Hirshleifer (1925–2005) was Professor of Economics Emeritus at the University of California, Los Angeles. He received his Ph.D. at Harvard University and served as an economist at RAND Corporation and taught at the University of Chicago.