Sunday, October 14, 2007
Posted by D. Daniel Sokol
The number of Microsoft papers continues to grow. The latest foray into this field is by Kai-Uwe Kuhn of the University of Michigan's Department of Economics and John Van Reenen of the London School of Economics' Centre for Economic Performance in their paper Interoperability and Foreclosure in the European Microsoft Case.
ABSTRACT: In this paper we discuss some of the most important economic issues raised in European Commission vs. Microsoft (2004) concerning the market for work group servers. In our view, the most important economic issues relate to (a) foreclosure incentives and (b) innovation effects of the proposed remedy. We discuss the economic basis for the Commission's claims that Microsoft had incentives to exclude rivals in the work group server market through degrading the interoperability of their server operating systems with Windows. We also examine the impact of compulsory disclosure of information on interoperability and argue that the effects on innovation are not unambiguously negative as Microsoft claim. We conclude with some general implications of the case for anti-trust enforcement in high innovation sectors.