Microsoft Plays Hardball: The Use of Exclusionary Pricing and Technical Incompatibility to Maintain Monopoly Power in Markets for Operating System Software

51 Pages Posted: 22 Sep 2000

See all articles by Kenneth C. Baseman

Kenneth C. Baseman

Microeconomic Consulting and Research Associates, Inc. (MiCRA)

Frederick R. Warren-Boulton

Microeconomic Consulting and Research Associates, Inc. (MiCRA)

Glenn Woroch

University of California, Berkeley; Compass Lexecon; Georgetown Center for Business & Public Policy

Abstract

This article examines Microsoft's licensing practices for its MS-DOS and Microsoft Windows operating system software. Our main focus is on Microsoft's use of CPU (central processing unit, or per-processor) licenses, under which an original equipment manufacturer (OEM) of personal computers pays a royalty for each machine it ships instead of for each unit of MS-DOS installed. We also examine Microsoft's practice of requiring in these licenses a minimum number of personal computers (PCs) on which MS-DOS can be installed, Microsoft's tying of Microsoft Windows and technical support information to the sale of MS-DOS, and Microsoft's attempts to induce technical incompatibility between MS-DOS and its main competitor, DR-DOS. Finally, we turn to the proposed consent decree between Microsoft and the Department of Justice.

JEL Classification: K21, L41, L42

Suggested Citation

Baseman, Kenneth C. and Warren-Boulton, Frederick R. and Woroch, Glenn, Microsoft Plays Hardball: The Use of Exclusionary Pricing and Technical Incompatibility to Maintain Monopoly Power in Markets for Operating System Software. Available at SSRN: https://ssrn.com/abstract=241988 or http://dx.doi.org/10.2139/ssrn.241988

Kenneth C. Baseman

Microeconomic Consulting and Research Associates, Inc. (MiCRA) ( email )

Demonet Building
1155 Connecticut Avenue, N.W., Suite 900
Washington, DC 20036
United States

Frederick R. Warren-Boulton

Microeconomic Consulting and Research Associates, Inc. (MiCRA) ( email )

Demonet Building
1155 Connecticut Avenue, N.W., Suite 900
Washington, DC 20036
United States

Glenn Woroch (Contact Author)

University of California, Berkeley ( email )

Department of Economics
549 Evans Hall #3880
Berkeley, CA 94720-3880
United States
510-642-4308 (Phone)
510-642-6615 (Fax)

HOME PAGE: http://elsa.berkeley.edu/~woroch/

Compass Lexecon ( email )

1111 Broadway
Oakland, CA 94607
United States
510-285-1266 (Phone)
510-285-1245 (Fax)

HOME PAGE: http://www.compasslexecon.com/professionals/bio?id=141

Georgetown Center for Business & Public Policy ( email )

3700 O Street, NW
Washington, DC 20057
United States
202-687-3686 (Phone)

HOME PAGE: http://cbpp.georgetown.edu/

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