Re: merge Intel & Microsoft

Robin Hanson (
Mon, 08 Nov 1999 09:49:42 -0500

Chris Hibbert wrote:
> >> I guess it comes down to how serious these are as entry threats.
> >> If they don't have much of a chance of beating Intel or Microsoft,
> >> then it's a shame to impose great inefficiency on current customers
> >> merely to increase a small chance of a competitor beating them.
>But they don't have to beat Microsoft to make a difference; carving
>out a reasonable market niche is enough. If Wintel doesn't have a
>monopoly and they have active competition they have to conduct their
>business differently. Doesn't that change the analysis of the situation?

It's a matter of degree, and of tradeoffs. When consumers value is mainly for a combination of products, e.g., a CPU, screen, OS, and word processor, then when one company dominates the markets for more than one of these components, there are benefits as well as costs. The benefits are that prices come down, and that the components are better integrated (i.e., customers avoid having each component maker say its the other one that is at fault for interface problems). A cost is that this firm can hinder competition by purposely making its component incompatible with competing components. This cost is reduced if competitors can coordinate to offer integrated systems.

If Microsoft is broken up, with an OS company and one or more applications companies, we should expect to see higher prices for these things, poorer integration between them, and less intentional incompatibility between say the OS and competing applications. Is this a good thing on net? Very hard to say.

Robin Hanson Asst. Prof. Economics, George Mason University MSN 1D3, Carow Hall, Fairfax VA 22030
703-993-2326 FAX: 703-993-2323