E-mails give peek at Microsoft strategies

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Market Forces

Having huge margins is not unusual in an immature market. Customers can't really judge how much the product or service is worth, so the initial providers can charge whatever the market will bear.

In a free market, these profits attract more providers, and competition lowers to the price to a point where the firms still make a profit, but not in the "90%+ margin" range. As the profits dip, some of the firms leave the market, and eventually an equilibrium forms. If firms can make money at this equilibrium, it is called a "normal profit" and everyone is happy. If not, either a nonprofit entity (like a governemt) subsidizes the suppliers, or the market disappears.

When new suppliers are prevented from entering the market, prices get distorted. This is the kind of thing that anti-trust laws are supposed to prevent.

There is such a thing as a "natural monopoly" where economy of scale actually make a single supplier the most efficient solution. For example, most towns only have one water company. These natural monopolies are regulated by government to prevent abused of the consumers.

This means that when there is a monopoly, there is always going to be government scrutiny. In the case of operating systems, it would be much better for the industry if new entrants lowered the prices rather than have government dictate on consumers' behalf.

Linux (and other OSes) are trying the first approach, while most governments are trying the second. The two are not compatible... how is Linux going to survive in a regulated OS industry?

Posted by: Font   Posted on: 03/17/04 You are currently: a Guest | Members login | Terms of Use

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