Re: Problems of Reiser v. Microsoft

[rlande@UBmail.ubalt.edu]

The fact that MS is
> perfectly willing to *pay* to distribute a product, which is expensive
> to develop, for which it charges nothing, makes it hard to imagine a
> bevy of competitors.

Please remember that Microsoft is not the only one "paying" for the 
distribution of its browser.  Recipients who do not want IE are also
paying in the sense that IE costs them the time that it takes to remove
IE, as well as the disc space used up by the files that remain.
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Assume for the sake of argument that the Microsoft strategy is predatory 
and anticompetitive in the long run.  It is difficult to characterize
their predatory strategy in traditional terms.  In other words, it is
difficult to figure out which traditional label to put onto Microsoft's
conduct.   

Should we call it old fashioned straightforward predatory pricing, as
opposed to just a new entrant giving away free samples, and figure AVC not
on a copy-by-copy basis (in  which case AVC is virtually zero) but rather
figure AVC in terms of the entire cost of developing each generation of IE
divided by the number of copies installed - in which case the cost is
significantly more than zero and they are engaged in predatory
pricing?  The problem with simply labeling their conduct as old fashioned
predatory pricing is that it can be argued that the above measure is
really ATC, and that AVC really is zero.

On the other hand, is their conduct best characterized as a strategy
that raises rivals' costs, since it makes entry into the browser market
harder?  Or, is what is really going on that it "raises consumers'
transaction costs" since consumers have to get rid of IE  and use up disc
space?  Or, should we instead characterize the Microsoft strategy and why
it is anticompetitive in terms of creating and taking advantage of 
imperfect information (similar to Kodak).  In other words, even if the
"real" cost to consumers from the tie is just two minutes of time to get
rid of the icon and 10 cents worth of disc space used up by unnecessary IE
files, many consumers don't know this and are risk avoiders.
Many consumers arn't willing to take the chance of messing up other
applications if they get rid of IE and use Netscape instead, so they just
play it safe and use IE.

Which pidgeonhole fits best?  Is there another pidgeonhole that I have
left out that would better characterize their conduct (assuming for the
sake of argument that it is anticompetitive in the long run)?

Bob Lande