The fun folks at Slashdot are enjoying ripping apart a new study of the effects of a Microsoft breakup. The study is published by a group that Microsoft contributes money to and reaches the conclusion that with a Microsoft breakup, the price of Windows would rise as high as $1,000 per license assuming the average price of a computer is $2,000.
I find this to be as absurd as the Slashdotters, but there’s something they seem to be missing — that figure is completely consistent with the government’s own case. The government claimed Microsoft has a monopoly power on Windows and yet several economists, including some publishing in peer reviewed academic journals, estimate the monopoly price for Windows that would maximize profits to be $900. Even an economist testifying for the government at the MS anti-trust trial, Franklin Fisher, conceded that if Microsoft does indeed have a monopoly power it charges far less than the monopoly price for Windows.
One of the things the Slashdotters seem to think is wrong with this price is that obviously a lot fewer people would be willing to buy Windows at $900, but this shows an obvious unfamiliarty with economics since firms rarely are maximize profits by solely maximizing net sales. At $900, obviously, Microsoft might sell far fewer copies of Windows, but it would not need to sell nearly as many copies at $900 as it needs to at say $150 or whatever the average current price of a Windows license is (not that legally the law only requires that the government prove a firm has monopoly power to bring antitrust actions which is a bit like a police officer giving a ticket to a motorist because his car has the ability to go faster than the speed limit, regardless of whether or not the driver is actually going faster than the speed limit).
As the study author readily admits, the real implication of his analysis is that the existing pricing structure of Windows is completely inconsistent with the claim that Microsoft has an OS monopoly.