Principles of Economics- Mankiw (5th) 361

Principles of Economics- Mankiw (5th) 361 - CHAPTER 16 O L...

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CHAPTER 16 OLIGOPOLY 371 Justice Department). Testifying for the government was a prominent economist (MIT professor Franklin Fisher). Testifying for Microsoft was an equally promi- nent economist (MIT professor Richard Schmalensee). At stake was the future of one of the world’s most valuable companies (Microsoft) in one of the econ- omy’s fastest growing industries (computer software). A central issue in the Microsoft case involved tying—in particular, whether Microsoft should be allowed to integrate its Internet browser into its Windows operating system. The government claimed that Microsoft was bundling these two products together to expand the market power it had in the market for computer operating systems into an unrelated market (for Internet browsers). Allowing Microsoft to incorporate such products into its operating system, the government argued, would deter new software companies such as Netscape from entering the market and offering new products. Microsoft responded by pointing out that putting new features into old
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