Winners, Losers & Microsoft Competition And Antitrust In High Technology

In the well-researched and compiled book, Winners, Losers & Microsoft Competition and Antitrust in High Technology authors Stan J. Liebowitz and Stephen E. Margolis discuss a variety of economic theories and challenge some perceived market inefficiencies. They begin their discussion with an explanation as to why certain products stand out in comparison to others. They discuss the value of networking and how it leads to the establishment of standards in the creation and valuation of products. The authors discuss the reasoning as to why certain products succeed while others fail citing the Dvorak keyboard as an example. The authors cites the economic concept of “Path Dependence” to allude to explain why economic efficient trends and products

This concept while ironic in nature accurately explains the economic concept that states the company with the best product will have the greatest demand. On one hand this is true. However looking at VHS tapes versus Beta format (higher quality VHS alternative) this was not the case. The authors begin to question, whether this was rather a failure in the market, an outlier? For further evidence the author discusses the QTWY keyboard we have come to know today. The organization of the keys is seemingly random, “Sholes in order to mitigate a problem with the jamming of typing hammers [came up with the key layout]”(12). A Rival keyboard was patented soon thereafter dubbed the, “Dvorak Keyboard” which was as Dvorak argued introduced as a more effective and efficient keyboard laid out to ensure efficiency with keys laid out to increase the speed at which words could be typed. A study was even conducted under the guidance of the government which (while extremely inaccurate and bias, as concluded now) supported Dvorak’s claim that this keyboard was in fact more efficient. However, looking around today, we don’t use the Dvorak keyboard. Thus leading to negate the fact that the market tends toward the more efficient product. The reason behind this logic highlights the role of networking and standards in customer preference in the development of the

However, networking as an economic term means something a slightly different. The Networking effect refers to convergence of, “compatibility, conformity, or certain other kinds of interactions”(4) which help to promote widespread usage leading it to become a standard. When something becomes a standard it become the predominant product. This means that it is the universally used standard. In the case of the QTWY keyboard, being the only available keyboard at the time of its emergence into the market it became the standard. With respect to firms, this can be explained by the fact that when there is a larger firm who holds a monopoly, and a smaller firm seeks to enter, the barriers surrounding it are high. For example if a smaller computer company were to emerge rivaling Microsoft, it would be extremely difficult for it to enter the market and compete with it on any viable level due to the high monetary costs surrounding research, production, advertising etc. This makes it hard to effectively enter a high cost market. While the later example with keyboards is not as high cost, the standardization makes it practically