A Study On Competition In The IT Industry:case Of DOJ.V.s.Microsoft

Traditional economics shows its limitations and inconsistencies in analyzing firms operating in the iT industry, in light of a market structure concurrently characterized by a high degree of monopoly and an accelerated innovation process. In addition, a number of emerging features have determined the rules of operations in the IT industry. Therefore, the market structure of the IT industry, altogether with its competitive status, appears as an area of increasing research interests. By reviewing the development of the software industry, which is a major player in contemporary IT industry, between 1990 and 2000, and undertaking an in-depth analysis on the case of DOJ against MS, this thesis intends to provide a heifer understanding on the competitive status of the IT industry, as well as to shed new theoretical insights to the current economics knowledge base. The Industrial Organization (JO) theory, specifically its monopoly analysis, insists that enterprises with monopoly power tend to elevate prices and reduce productions, leading to some negative effects on market efficiency. Through examining the DOJ. vs. MS. case study, altogether with relevant economic analysis on the software industry, this thesis suggests that the IT industry displays features largely different from traditional industries. These new features have impelled enterprises to pursue larger market shares and strive to be the first in the market. Consequently, a monopoly-like market structure seems inevitable. However, intensive competitions and superior returns in the IT industry make monopoly structure, if any, unsteady and short-lived. In short, there are unique competitive rules determining the operating mechanisms in the IT industry, e.g. a seemingly high degree of monopoly market structure on the one end, reflecting the realization of business strategies at various competitive stages, and continuous, accelerated innovations and fierce competitions for becoming the market leader on the other, which is the essence of competing in the dynamic IT arena.