Unformatted text preview: P enf ield Jackso n declared Micro so f t to be a
monopoly (a market where there are many buyers but o nly o ne do minant seller), the co llective
respo nse sho uld have been “o f co urse.” Why? The natural state o f a market where netwo rk ef f ects
are present (and this includes o perating systems and Of f ice so f tware) is f o r there to be o ne majo r
player. Since bigger netwo rks o f f er mo re value, they can charge custo mers mo re. Firms with a
co mmanding netwo rk ef f ects advantage may also enjo y substantial bargaining po wer o ver
partners. Fo r example, Apple, which co ntro ls o ver 75 percent o f digital music sales, f o r years was
able to dictate so ng pricing, despite the tremendo us pro tests o f the reco rd labels.B. Barnes, “NBC
Will No t Renew iTunes Co ntract,” New Yo rk Times, August 31, 2007. In f act, Apple’s strangleho ld
was so stro ng that it leveraged bargaining po wer even tho ugh the “Big Fo ur” reco rd labels
(Universal, So ny, EMI, and Warner) were themselves an oligopoly (a market do minated by a
small number o f po werf ul sellers) that to geth...
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This document was uploaded on 01/31/2014.
- Winter '14