From: John Conover <john@email.johncon.com>
Subject: Re: the prescence of monopolies such as Microsoft; what to do about them
Date: 9 May 1999 20:44:30 -0000
Archimedes Plutonium writes:
> Well, I promised to do a thread on the Microsoft monopoly. And I am
> ready to do that. I was waiting for my mind to settle on a good, or
> best plan. And I have what I consider a best plan. I shall compare the
> Drug industry to the Computer Software Industry. And to look for
> legislation that equilizes the software industry to that of drug
> industry. Ever notice that the drug industry has no monopolies on the
> extreme order of Microsoft to software industry? And that the drug
> industry has some of the very healthiest (not meant to be a pun)
> competition of any industry on Earth and perhaps the competition of the
> drug industry should be a model for other industries. And not only for
> computer software, but for the US Justice Department in their efforts
> to make the telecom industry a competitive industry. So, let me use the
> drug industry as the model.
>
Being the largest company in an industry has unfair advantages, even
if the company does not practice predatory business tactics and
strategies. Assuming that market share is a fractal with a dimension
of 2, (a reasonable assumption, emperically,) then the chances of a
smaller company EVER surpassing a larger one is A / B where A is the
market share of the smaller company, and B is the market share of the
larger company. The duration of the smaller company, (before it goes
bust,) will be proportional to A * (B - A).
If the market has many competitors, (ie., a panoply,) then the demise
of the market leader is inevitable, eventually. (The average duration
of a company on the US exchanges is 22 years, and the duration
frequency histogram is very close to to a 1 / sqrt (t) scenario,
which, theoretically, it should be for a fractal dimension of 2.)
However, if the market does not have many competitors, (ie., an
oligopoly,) then the duration of the market leader is virtually
eternal.
In addition, there are game-theoretic considerations which tend to
imply that the evolution of industrial markets is to start out as a
panoply, and over time, evolve into an oligopoly of only a few
companies, each of which makes minimal money, with static market
share. (There is a possibility that this is what is happening in the
ISP business today with all of the consolidation and price
erosion-Detroit is often cited as an example, as is the airplane
business.)
John
--
John Conover, john@email.johncon.com, http://www.johncon.com/