An Expensive Pig in a Poke: Estimating the Costs of the District Court's Proposed Breakup of Microsoft

Abstract

This paper analyzes some consequences of the district courts proposed remedy. Due to changes in pricing strategies and/or the double marginalization problem, prices for operating systems and applications are likely to rise. I estimate what these extra costs to consumers might be. My best guess (actually quite conservative) is $120 billion worldwide over 3 years, although it could be over $300 billion. I also note that the remedy decreases competition in several important markets, including high end servers and game consoles. The paper also includes an analysis of how the remedy is likely to be interpreted.

JEL Classification: L4, L5, L21, O3