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  Prying apart Microsoft's pricing logic
Time: 11:56 EST/16:56 GMT | News Source: CNET | Posted By: Robert Stein

Stanford Article "At the time of the Justice Department's landmark antitrust case against Microsoft, the software maker was selling its Windows operating system to computer manufacturers for an extremely low price given the company's dominance in the market. At the same time, it was charging significantly more for its Microsoft Office application suite. Given that both products had comparable market shares, why did Microsoft charge only about $60 for Windows--its "base" product--instead of the $1,800 that many estimate it could have demanded, and why did it choose to price Office--the "complementary" good--at nearly four times as much? "

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#1 By 3339 (64.160.58.135) at 3/22/2004 5:34:53 PM
"I have never seen any evidence Microsofts OS was priced higher than competing products. Which has always proven to me that Microsoft was NOT a monopoly. Microsoft HAS worried about market share and priced OS accordingly."

Umm, no, even Microsoft has admitted that they have set pricing on some products rather arbitrarily. Which proves to me that they ARE a monopoly.

#2 By 3339 (64.160.58.135) at 3/22/2004 6:05:59 PM
Umm, no... I have quoted it here about 50 times to the letter though. I don't keep my stack of 1400 pages of Microsoft judgements at work.

If you review the Circuit's Appeal ruling where they upheld Penfield's decisions, you will find it there... It's early in the material... I would guess in the 30s or 40s (pgs).... In the ruling, the Court is stating that even when there was some evidence to support MS's arguments, that the same evidence also served to impeach their defense... They specifically state the example that Microsoft cannot state any specific reasons for pricing Windows as it has, and that they felt that they would even phrase it as an "arbitrary" valuation.

Would you like to refute this?

#3 By 3339 (64.160.58.135) at 3/22/2004 6:43:41 PM
Parkker, I try not to converse with people who don't have the slightest understanding of things. You say you don't refute imaginary examples, but you tried to refute my FACTUAL example by claiming it was IMAGINARY. The fact is your refutation is what is IMAGINARY.

There is no rule in any U.S. law that says if your price is lower than your competitors, you are absolved of being a monopoly. (It is a sign that a company is a monopoly if they have higher prices than their "competition" WHILE maintaining their marketshare, but I don't see how anyone with a half functioning brain would try to state that there is no way you can be a monopoly simply because of higher prices.)

Of course, the rest of your post is so full of drivel that no one will take you seriously: i.e. are you suggesting that any company with a higher price (in this case, Apple) IS a monopoly? Retarded. Apple keeps high profit margins to keep market share? That doesn't make sense: maybe higher revenue but higher prices doesn't result in high market share -- retarded. Apple actually makes smaller margins on iPods than other products. Actually, the iPod and iPod Mini are CERTAINLY CONTINUING to SUCCEED. Actually, Amazon stats are not market metrics.

And, in fact, arbitrarily setting prices is an indicator of monopolies. Apple and Amazon and other companies need to set prices based on cost, competition, volume, and other real world factors.... Microsoft can simply say, "We'll arbitrarily charge this" because they in fact have a "captive audience" because of their monopoly.

#4 By 3339 (64.160.58.135) at 3/22/2004 7:07:05 PM
uh huh.

#5 By 135 (208.186.90.168) at 3/22/2004 11:24:42 PM
If you don't like the price...

don't buy the product.

#6 By 3653 (209.149.57.116) at 3/22/2004 11:30:20 PM
sodajerk gave an example? where? that was nothing but a goose chase... and given jerk's usual tactics... a dead end.

As usual, when CALLED on something... jerk responds with a statment that he's provided it 100s of times before.

SHOW IT. OR SHUT UP.

#7 By 19992 (68.169.46.164) at 3/23/2004 12:35:18 AM
Parrker

You're view of a monopoly is a little skewed. Pricing of the product does not a monopoly make. Here is what the courts concluded about MS "In this case, after concluding that Microsoft had monopoly power, the District Court held that Microsoft had violated s 2 by engaging in a variety of exclusionary acts (not including predatory pricing), to maintain its monopoly by preventing the effective distribution and use of products that might threaten that monopoly. Specifically, the District Court held Microsoft liable for: (1) the way in which it integrated IE into Windows; (2) its various dealings with Original Equipment Manufacturers ("OEMs"), Internet Access Providers ("IAPs"), Internet Content Providers ("ICPs"), Independent Software Vendors ("ISVs"), and Apple Computer; (3) its efforts to contain and to subvert Java technologies; and (4) its course of conduct as a whole. Upon appeal, Microsoft argues that it did not engage in any exclusionary conduct."

Emphasis added by me. Text is taken from the D.C Cirsuit Court of Appeals decision topic II point B on page 25 or 26.

#8 By 19992 (68.169.46.164) at 3/23/2004 1:00:22 AM
sodajerk

Skimming through the D.C court of appeals decision I can't seem to find anything that would indicate that MS ever admitted to setting their prices arbitrarily. It looks like they argued against that all the way. Here is the relevant text from the decision

"More telling, the District Court found that some aspects of Microsoft's behavior are difficult to explain unless Windows is a monopoly product. For instance, according to the District Court, the company set the price of Windows without considering rivals' prices"

Frankly, a lot of the stuff that came out of the courts in regards to MS was/is quite appalling. Reading over the docs, it looks like MS was 'guilty until proven innocent'.

This text is taken from the D.C Cirsuit Court of Appeals decision, under "Direct Proof" 4th paragraph.

The entire document may be viewed (plaintext) here
http://cyber.law.harvard.edu/msdoj/msft_ruling.html

#9 By 19992 (164.214.4.61) at 3/24/2004 8:19:33 AM
#19 My post was meant to highlight to you that pricing was not the sole issue (in fact it was not an issue at all) in the Court of Appeals decision.

As far as your points above, I can see where you are trying to go with this, but you should probably read the document that I linked to above.

(1) It's not the inclusion of IE with the Windows package that was a problem, it was the way they did it.

Conclusions of Law, at 39, its findings of fact in support of that conclusion center upon three specific actions Microsoft took to weld IE to Windows: excluding IE from the "Add/Remove Programs" utility; designing Windows so as in certain circumstances to override the user's choice of a default browser other than IE; and commingling code related to browsing and other code in the same files, so that any attempt to delete the files containing IE would, at the same time, cripple the operating system.

(2) They could have always chosen to pay retail for Windows at anytime.

That's beside the point (and wrong). The reason this was a problem (in the eyes of the Court) is thus:

"In sum, we hold that with the exception of the one restriction prohibiting automatically launched alternative interfaces, all the OEM license restrictions at issue represent uses of Microsoft's market power to protect its monopoly, unredeemed by any legitimate justification. The restrictions therefore violate s 2 of the Sherman Act. "

(3) Making Java run faster is considered subversion?

No, it's not

From 3a

"As explained above, however, a monopolist does not violate the antitrust laws simply by developing a product that is incompatible with those of its rivals"

"The JVM, however, does allow applications to run more swiftly and does not itself have any anticompetitive effect"

And finally from 3C

"Microsoft's "Java implementation" included, in addition to a JVM, a set of software development tools it created to assist ISVs in designing Java applications. The District Court found that, not only were these tools incompatible with Sun's cross-platform aspirations for Java--no violation, to be sure-but Microsoft deceived Java developers regarding the Windows-specific nature of the tools"


From the Court of Appeals decision. This really seems to get to the heart of the complaint.

"Finally, other Microsoft documents confirm that Microsoft intended to deceive Java developers, and predicted that the effect of its actions would be to generate Windows-dependent Java applications that their developers believed would be cross-platform; these documents also indicate that Microsoft's ultimate objective was to thwart Java's threat to Microsoft's monopoly in the market for operating systems. One Microsoft document, for example, states as a strategic goal: "Kill cross-platform Java by grow[ing] the polluted Java market.""


(4) They probably did. There were definately some odd things about this case. However, even pretending the odd things (selective market considerations, etc) were not present, there is plenty of evidence to suggest that MS behaved in an extremely anti-competitive manner in several ways.



Finally, thanks for taking this stance. It's been awhile since I read those docs, it was kind of nice to crawl through them again.

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