According to, Microsoft operating systems posses over 90% of the worldwide OS market (Protalinski). Microsoft provides the greatest example of a software company that holds a “natural monopoly” on its market. Essentially, economies of scale mean that a large producer can either do it better or cheaper than a smaller producer, ceteris paribus. This leads to what is known as an economy of scale. Development of software poses a massive fixed cost to a company where distribution only comprises a small variable cost in the production process. The second benefit of a monopoly in the software industry is that it provides cheaper or better products due to the vast economy in the industry. MacOS, Unix shells, Open Look, and many other software systems are designed to resemble the Microsoft platform as closely as possible for the sake of appealing to the most widely accepted software program. Like telephones, a ubiquitous software system such as Microsoft office provides a universally understandable format to the average consumer. All phones have 12 buttons that are all in the same position and labeled the same. Uniformity is beneficial because it requires that users only have to learn how to use one system. Why did the software industry develop in to a “natural monopoly?” First, software is much more efficient with uniformity. Thus, those who are not a consumer of the larger company will switch in order to gain the increased access.Īn example of “natural monopoly” that has risen in the last few years is the software industry. For the telephone example, the company with the largest number of consumers provides access to more people. The general rule for “natural monopolies” is that the larger firm in the industry will eventually rise to dominate the entirety of the industry. The concept of a natural monopoly is very simple-efficiency of a certain market requires that it be provided by the few rather than the many. The reason the telephone and railway systems are known as “natural monopolies” and not just normal monopolies is because many of the competitors in these markets tend to die out leaving just one or a few providers for any given geographic area. All trains need to be able to use the same structure of tracks to for the same reason. All phones need to be connected and work together to attain the highest benefit. Typical examples of so-called “natural monopolies” are the telephone and railway systems.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |