Re: Merge Intel & Microsoft

Robin Hanson (
Sat, 02 Oct 1999 18:34:54 -0400

Wei Dai wrote:

> Are there any economists that do support this position?

I do. And I ran the idea by a mailing list full of economists andno one spoke against it.

> It's not completely
> obvious to me that the (social) benefit of the merge exceeds the cost.

In the model I described, there are no costs, only benefits.So the question is: what important things that model might be missing?

> Microsoft and Intel may already have captured some of the potential
> benefits of merging through reciprical agreements to lower prices.

Perhaps. But it would be hard to monitor such an agreement. Thesame pressures that lead to the break up of cartels work here. Intel could offer Dell hidden price discounts, for example, that they don't tell Microsoft about. Or they could claim to give discounts they don't. Microsoft could do the same.

> Also, assuming that most Microsoft shareholders also hold Intel stock,
> shouldn't Microsoft already be maximizing some joint function of
> Microsoft's profit and Intel's profit instead of maximizing Microsoft's
> profit alone?

Microsoft employees are incentivized by Microsoft stock and options,not by Intel stock or options. I find it pretty implausible they are trying to maximize anything but Microsoft stock.