Microeconomics for MBAs 43. The Economic Way of Thinking for Managers. Microeconomics for MBAs develops the economic way of thinking through problems that MBA students will find relevant to their career goals. Maths is kept simple and the theory is illustrated with real-life scenarios | Chapter 12 Monopoly Power and Pricing Decisions must be because Microsoft has placed a value on not having the Netscape icon on the desktop that is higher than Netscape s value of having it there. If the reverse were true Netscape valued the desktop space more highly than Microsoft then Netscape would have bought a place on the desktop for its icon long ago. If the Justice Department gets its way and Microsoft is forced to have a Navigator icon on the desktop Coase s central point still holds. The value Microsoft places on not having the Navigator icon on the desktop should still be higher than the value Netscape places on having the icon there. As a consequence once the dust from the trial settles Microsoft should quickly pay Netscape to remove its icon. The only meaningful lasting change would be that some of Microsoft s wealth is transferred to Netscape. The Justice Department may reason that this outcome represents justice given Microsoft s alleged monopoly power to dictate market outcomes including use of the desktop. While the monopoly claim is surely disputable all that needs to be pointed out here is that the ruling does nothing to thwart Microsoft s supposed monopoly powers. It means however that Netscape which invested nothing to develop the Windows operating system network and desktop will have gotten Microsoft s property for nothing. It also means that Microsoft will be forced to use whatever market power as well as its expertise in developing and promoting programs to buy back its property in the process possibly hiking its prices albeit marginally in order to pad the pockets of Netscape s owners. It is hard for us to see how such an outcome constitutes justice or protects consumers. Concluding Comments The consequences of monopoly are higher prices and lower production levels than are possible under perfect competition. Monopoly power can also result in inefficiency in production for the monopolistic firm does not produce to the point where its .
