Network effects and conditions of entry: Lessons from the Microsoft case

Antitrust Law Journal

Volumn 69, Issue 1, 2001, Pages 87-111

  Werden, Gregory J ^a  

^a NONE

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EID: 0035594419     PISSN: 00036056     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Article

References (217)

1. The term "conditions of entry," as used herein, refers to everything relating to the costs of, or requirements for, successful entry, and to every reason why entry may succeed or fail. This term encompasses more than "barriers to entry" and avoids controversy over the definition of that term. See notes 44-62 and accompanying text infra; ROBERT H. BORK, THE ANTITRUST PARADOX ch. 16 (1978) (distinguishing "natural" and "artificial" "barriers to entry" and arguing that antitrust should be concerned only about the latter). Moreover, the "barrier" metaphor may paint a misleading picture.
2. Courts have rejected merger challenges on the grounds that actual or threatened entry would reverse or prevent any significant anticompetitive effects. E.g., United States v. Baker Hughes Inc., 908 F.2d 981, 987-89 (D.C. Cir. 1990); United States v. Syufy Enters., 903 F.2d 659, 664-69 (9th Cir. 1990); United States v. Waste Mgmt., Inc., 743 F.2d 976, 981-84 (2d Cir. 1984).
3. Courts have rejected merger challenges on the grounds that actual or threatened entry would reverse or prevent any significant anticompetitive effects. E.g., United States v. Baker Hughes Inc., 908 F.2d 981, 987-89 (D.C. Cir. 1990); United States v. Syufy Enters., 903 F.2d 659, 664-69 (9th Cir. 1990); United States v. Waste Mgmt., Inc., 743 F.2d 976, 981-84 (2d Cir. 1984).
4. Courts have rejected merger challenges on the grounds that actual or threatened entry would reverse or prevent any significant anticompetitive effects. E.g., United States v. Baker Hughes Inc., 908 F.2d 981, 987-89 (D.C. Cir. 1990); United States v. Syufy Enters., 903 F.2d 659, 664-69 (9th Cir. 1990); United States v. Waste Mgmt., Inc., 743 F.2d 976, 981-84 (2d Cir. 1984).
5. Monopoly power is generally understood to be "the ability (1) to price substantially above the competitive level and (2) to persist in doing so for a significant period without erosion by new entry or expansion." AD/SAT v. Associated Press, 181 F.3d 216, 227 (2d Cir. 1999) (quoting 2A PHILLIP E. AREEDA ET AL., ANTITRUST LAW ¶ 501, at 86 (1995)). The persistence requirement finds wide support in the case law. See, e.g., W. Parcel Express v. UPS, 190 F.3d 974, 975 (9th Cir. 1999) (to satisfy the monopoly power requirement of Section 2, the plaintiff must "show that there are significant barriers to entry and show that existing competitors lack the capacity to increase their output in the short run"); Coastal Fuels of P.R., Inc. v. Caribbean Petroleum Corp., 79 F.3d 182, 196-97 (1st Cir. 1996) ("monopoly power" "may be proved circumstantially by showing that the defendant has a dominant share in a well-defined relevant market and that there are significant barriers to entry in that market"); Colo. Interstate Gas Co. v. Natural Gas Pipeline Co. of Am., 885 F.2d 683, 695-96 (10th Cir. 1989) ("If the evidence demonstrates that a firm's ability to charge monopoly prices will necessarily be temporary, the firm will not possess the degree of market power required for the monopolization offense.") (footnote omitted). See also Gregory J. Werden, Demand Elasticities in Antitrust Analysis, 66 ANTITRUST L.J. 363, 372-80 (1998) (analyzing cases).
6. Monopoly power is generally understood to be "the ability (1) to price substantially above the competitive level and (2) to persist in doing so for a significant period without erosion by new entry or expansion." AD/SAT v. Associated Press, 181 F.3d 216, 227 (2d Cir. 1999) (quoting 2A PHILLIP E. AREEDA ET AL., ANTITRUST LAW ¶ 501, at 86 (1995)). The persistence requirement finds wide support in the case law. See, e.g., W. Parcel Express v. UPS, 190 F.3d 974, 975 (9th Cir. 1999) (to satisfy the monopoly power requirement of Section 2, the plaintiff must "show that there are significant barriers to entry and show that existing competitors lack the capacity to increase their output in the short run"); Coastal Fuels of P.R., Inc. v. Caribbean Petroleum Corp., 79 F.3d 182, 196-97 (1st Cir. 1996) ("monopoly power" "may be proved circumstantially by showing that the defendant has a dominant share in a well-defined relevant market and that there are significant barriers to entry in that market"); Colo. Interstate Gas Co. v. Natural Gas Pipeline Co. of Am., 885 F.2d 683, 695-96 (10th Cir. 1989) ("If the evidence demonstrates that a firm's ability to charge monopoly prices will necessarily be temporary, the firm will not possess the degree of market power required for the monopolization offense.") (footnote omitted). See also Gregory J. Werden, Demand Elasticities in Antitrust Analysis, 66 ANTITRUST L.J. 363, 372-80 (1998) (analyzing cases).
7. Monopoly power is generally understood to be "the ability (1) to price substantially above the competitive level and (2) to persist in doing so for a significant period without erosion by new entry or expansion." AD/SAT v. Associated Press, 181 F.3d 216, 227 (2d Cir. 1999) (quoting 2A PHILLIP E. AREEDA ET AL., ANTITRUST LAW ¶ 501, at 86 (1995)). The persistence requirement finds wide support in the case law. See, e.g., W. Parcel Express v. UPS, 190 F.3d 974, 975 (9th Cir. 1999) (to satisfy the monopoly power requirement of Section 2, the plaintiff must "show that there are significant barriers to entry and show that existing competitors lack the capacity to increase their output in the short run"); Coastal Fuels of P.R., Inc. v. Caribbean Petroleum Corp., 79 F.3d 182, 196-97 (1st Cir. 1996) ("monopoly power" "may be proved circumstantially by showing that the defendant has a dominant share in a well-defined relevant market and that there are significant barriers to entry in that market"); Colo. Interstate Gas Co. v. Natural Gas Pipeline Co. of Am., 885 F.2d 683, 695-96 (10th Cir. 1989) ("If the evidence demonstrates that a firm's ability to charge monopoly prices will necessarily be temporary, the firm will not possess the degree of market power required for the monopolization offense.") (footnote omitted). See also Gregory J. Werden, Demand Elasticities in Antitrust Analysis, 66 ANTITRUST L.J. 363, 372-80 (1998) (analyzing cases).
8. Monopoly power is generally understood to be "the ability (1) to price substantially above the competitive level and (2) to persist in doing so for a significant period without erosion by new entry or expansion." AD/SAT v. Associated Press, 181 F.3d 216, 227 (2d Cir. 1999) (quoting 2A PHILLIP E. AREEDA ET AL., ANTITRUST LAW ¶ 501, at 86 (1995)). The persistence requirement finds wide support in the case law. See, e.g., W. Parcel Express v. UPS, 190 F.3d 974, 975 (9th Cir. 1999) (to satisfy the monopoly power requirement of Section 2, the plaintiff must "show that there are significant barriers to entry and show that existing competitors lack the capacity to increase their output in the short run"); Coastal Fuels of P.R., Inc. v. Caribbean Petroleum Corp., 79 F.3d 182, 196-97 (1st Cir. 1996) ("monopoly power" "may be proved circumstantially by showing that the defendant has a dominant share in a well-defined relevant market and that there are significant barriers to entry in that market"); Colo. Interstate Gas Co. v. Natural Gas Pipeline Co. of Am., 885 F.2d 683, 695-96 (10th Cir. 1989) ("If the evidence demonstrates that a firm's ability to charge monopoly prices will necessarily be temporary, the firm will not possess the degree of market power required for the monopolization offense.") (footnote omitted). See also Gregory J. Werden, Demand Elasticities in Antitrust Analysis, 66 ANTITRUST L.J. 363, 372-80 (1998) (analyzing cases).
9. Monopoly power is generally understood to be "the ability (1) to price substantially above the competitive level and (2) to persist in doing so for a significant period without erosion by new entry or expansion." AD/SAT v. Associated Press, 181 F.3d 216, 227 (2d Cir. 1999) (quoting 2A PHILLIP E. AREEDA ET AL., ANTITRUST LAW ¶ 501, at 86 (1995)). The persistence requirement finds wide support in the case law. See, e.g., W. Parcel Express v. UPS, 190 F.3d 974, 975 (9th Cir. 1999) (to satisfy the monopoly power requirement of Section 2, the plaintiff must "show that there are significant barriers to entry and show that existing competitors lack the capacity to increase their output in the short run"); Coastal Fuels of P.R., Inc. v. Caribbean Petroleum Corp., 79 F.3d 182, 196-97 (1st Cir. 1996) ("monopoly power" "may be proved circumstantially by showing that the defendant has a dominant share in a well-defined relevant market and that there are significant barriers to entry in that market"); Colo. Interstate Gas Co. v. Natural Gas Pipeline Co. of Am., 885 F.2d 683, 695-96 (10th Cir. 1989) ("If the evidence demonstrates that a firm's ability to charge monopoly prices will necessarily be temporary, the firm will not possess the degree of market power required for the monopolization offense.") (footnote omitted). See also Gregory J. Werden, Demand Elasticities in Antitrust Analysis, 66 ANTITRUST L.J. 363, 372-80 (1998) (analyzing cases).
10. Monopoly power is generally understood to be "the ability (1) to price substantially above the competitive level and (2) to persist in doing so for a significant period without erosion by new entry or expansion." AD/SAT v. Associated Press, 181 F.3d 216, 227 (2d Cir. 1999) (quoting 2A PHILLIP E. AREEDA ET AL., ANTITRUST LAW ¶ 501, at 86 (1995)). The persistence requirement finds wide support in the case law. See, e.g., W. Parcel Express v. UPS, 190 F.3d 974, 975 (9th Cir. 1999) (to satisfy the monopoly power requirement of Section 2, the plaintiff must "show that there are significant barriers to entry and show that existing competitors lack the capacity to increase their output in the short run"); Coastal Fuels of P.R., Inc. v. Caribbean Petroleum Corp., 79 F.3d 182, 196-97 (1st Cir. 1996) ("monopoly power" "may be proved circumstantially by showing that the defendant has a dominant share in a well-defined relevant market and that there are significant barriers to entry in that market"); Colo. Interstate Gas Co. v. Natural Gas Pipeline Co. of Am., 885 F.2d 683, 695-96 (10th Cir. 1989) ("If the evidence demonstrates that a firm's ability to charge monopoly prices will necessarily be temporary, the firm will not possess the degree of market power required for the monopolization offense.") (footnote omitted). See also Gregory J. Werden, Demand Elasticities in Antitrust Analysis, 66 ANTITRUST L.J. 363, 372-80 (1998) (analyzing cases).
11. See, e.g., Nicholas Economides & Lawrence J. White, Networks and Compatibility: Implications for Antitrust, 38 EUR. ECON. REV. 651 (1994); David S. Evans & Richard Schmalensee, A Guide to the Antitrust Economics of Networks, ANTITRUST, Spring 1996, at 36; Michael L. Katz & Carl Shapiro, Antitrust in Software Markets, in COMPETITION, INNOVATION AND THE MICROSOFT MONOPOLY 29 (Jeffrey A. Eisenach & Thomas M. Lenard eds., 1999); William J. Kolasky, Network Effects: A Contrarian View, 7 GEO. MASON L. REV. 577 (1999); Mark A. Lemley & David McGowan, Legal Implications of Network Economic Effects, 86 CAL. L. REV. 479 (1998); S.J. Liebowitz & Stephen E. Margolis, Should Technology Choice Be a Concern of Antitrust Policy?, 9 HARV. J.L & TECH. 283 (1996); A. Douglas Melamed, Network Industries and Antitrust, 23 HARV. J.L. & PUB. POL'Y 147 (1999); Daniel L. Rubinfeld, Antitrust Enforcement in Dynamic Network Industries, 43 ANTITRUST BULL. 859 (1998); Carl Shapiro, Exclusivity in Network Industries, 7 GEO. MASON L. REV. 673 (1999); Howard A. Shelanski & A. Gregory Sidak, Antitrust Divestiture in Network Industries, 68 U. CHI. L. REV. 1 (2001); Stephen F. Ross, Network Economic Effects and the Limits of GTE Sylvania's Efficiency Analysis, 68 ANTITRUST L.J. 945 (2001); David J. Teece & Mary Coleman, The Meaning of Monopoly: Antitrust Analysis in High-Technology Industries, 43 ANTITRUST BULL. 801 (1998).
12. See, e.g., Nicholas Economides & Lawrence J. White, Networks and Compatibility: Implications for Antitrust, 38 EUR. ECON. REV. 651 (1994); David S. Evans & Richard Schmalensee, A Guide to the Antitrust Economics of Networks, ANTITRUST, Spring 1996, at 36; Michael L. Katz & Carl Shapiro, Antitrust in Software Markets, in COMPETITION, INNOVATION AND THE MICROSOFT MONOPOLY 29 (Jeffrey A. Eisenach & Thomas M. Lenard eds., 1999); William J. Kolasky, Network Effects: A Contrarian View, 7 GEO. MASON L. REV. 577 (1999); Mark A. Lemley & David McGowan, Legal Implications of Network Economic Effects, 86 CAL. L. REV. 479 (1998); S.J. Liebowitz & Stephen E. Margolis, Should Technology Choice Be a Concern of Antitrust Policy?, 9 HARV. J.L & TECH. 283 (1996); A. Douglas Melamed, Network Industries and Antitrust, 23 HARV. J.L. & PUB. POL'Y 147 (1999); Daniel L. Rubinfeld, Antitrust Enforcement in Dynamic Network Industries, 43 ANTITRUST BULL. 859 (1998); Carl Shapiro, Exclusivity in Network Industries, 7 GEO. MASON L. REV. 673 (1999); Howard A. Shelanski & A. Gregory Sidak, Antitrust Divestiture in Network Industries, 68 U. CHI. L. REV. 1 (2001); Stephen F. Ross, Network Economic Effects and the Limits of GTE Sylvania's Efficiency Analysis, 68 ANTITRUST L.J. 945 (2001); David J. Teece & Mary Coleman, The Meaning of Monopoly: Antitrust Analysis in High-Technology Industries, 43 ANTITRUST BULL. 801 (1998).
13. See, e.g., Nicholas Economides & Lawrence J. White, Networks and Compatibility: Implications for Antitrust, 38 EUR. ECON. REV. 651 (1994); David S. Evans & Richard Schmalensee, A Guide to the Antitrust Economics of Networks, ANTITRUST, Spring 1996, at 36; Michael L. Katz & Carl Shapiro, Antitrust in Software Markets, in COMPETITION, INNOVATION AND THE MICROSOFT MONOPOLY 29 (Jeffrey A. Eisenach & Thomas M. Lenard eds., 1999); William J. Kolasky, Network Effects: A Contrarian View, 7 GEO. MASON L. REV. 577 (1999); Mark A. Lemley & David McGowan, Legal Implications of Network Economic Effects, 86 CAL. L. REV. 479 (1998); S.J. Liebowitz & Stephen E. Margolis, Should Technology Choice Be a Concern of Antitrust Policy?, 9 HARV. J.L & TECH. 283 (1996); A. Douglas Melamed, Network Industries and Antitrust, 23 HARV. J.L. & PUB. POL'Y 147 (1999); Daniel L. Rubinfeld, Antitrust Enforcement in Dynamic Network Industries, 43 ANTITRUST BULL. 859 (1998); Carl Shapiro, Exclusivity in Network Industries, 7 GEO. MASON L. REV. 673 (1999); Howard A. Shelanski & A. Gregory Sidak, Antitrust Divestiture in Network Industries, 68 U. CHI. L. REV. 1 (2001); Stephen F. Ross, Network Economic Effects and the Limits of GTE Sylvania's Efficiency Analysis, 68 ANTITRUST L.J. 945 (2001); David J. Teece & Mary Coleman, The Meaning of Monopoly: Antitrust Analysis in High-Technology Industries, 43 ANTITRUST BULL. 801 (1998).
14. See, e.g., Nicholas Economides & Lawrence J. White, Networks and Compatibility: Implications for Antitrust, 38 EUR. ECON. REV. 651 (1994); David S. Evans & Richard Schmalensee, A Guide to the Antitrust Economics of Networks, ANTITRUST, Spring 1996, at 36; Michael L. Katz & Carl Shapiro, Antitrust in Software Markets, in COMPETITION, INNOVATION AND THE MICROSOFT MONOPOLY 29 (Jeffrey A. Eisenach & Thomas M. Lenard eds., 1999); William J. Kolasky, Network Effects: A Contrarian View, 7 GEO. MASON L. REV. 577 (1999); Mark A. Lemley & David McGowan, Legal Implications of Network Economic Effects, 86 CAL. L. REV. 479 (1998); S.J. Liebowitz & Stephen E. Margolis, Should Technology Choice Be a Concern of Antitrust Policy?, 9 HARV. J.L & TECH. 283 (1996); A. Douglas Melamed, Network Industries and Antitrust, 23 HARV. J.L. & PUB. POL'Y 147 (1999); Daniel L. Rubinfeld, Antitrust Enforcement in Dynamic Network Industries, 43 ANTITRUST BULL. 859 (1998); Carl Shapiro, Exclusivity in Network Industries, 7 GEO. MASON L. REV. 673 (1999); Howard A. Shelanski & A. Gregory Sidak, Antitrust Divestiture in Network Industries, 68 U. CHI. L. REV. 1 (2001); Stephen F. Ross, Network Economic Effects and the Limits of GTE Sylvania's Efficiency Analysis, 68 ANTITRUST L.J. 945 (2001); David J. Teece & Mary Coleman, The Meaning of Monopoly: Antitrust Analysis in High-Technology Industries, 43 ANTITRUST BULL. 801 (1998).
15. See, e.g., Nicholas Economides & Lawrence J. White, Networks and Compatibility: Implications for Antitrust, 38 EUR. ECON. REV. 651 (1994); David S. Evans & Richard Schmalensee, A Guide to the Antitrust Economics of Networks, ANTITRUST, Spring 1996, at 36; Michael L. Katz & Carl Shapiro, Antitrust in Software Markets, in COMPETITION, INNOVATION AND THE MICROSOFT MONOPOLY 29 (Jeffrey A. Eisenach & Thomas M. Lenard eds., 1999); William J. Kolasky, Network Effects: A Contrarian View, 7 GEO. MASON L. REV. 577 (1999); Mark A. Lemley & David McGowan, Legal Implications of Network Economic Effects, 86 CAL. L. REV. 479 (1998); S.J. Liebowitz & Stephen E. Margolis, Should Technology Choice Be a Concern of Antitrust Policy?, 9 HARV. J.L & TECH. 283 (1996); A. Douglas Melamed, Network Industries and Antitrust, 23 HARV. J.L. & PUB. POL'Y 147 (1999); Daniel L. Rubinfeld, Antitrust Enforcement in Dynamic Network Industries, 43 ANTITRUST BULL. 859 (1998); Carl Shapiro, Exclusivity in Network Industries, 7 GEO. MASON L. REV. 673 (1999); Howard A. Shelanski & A. Gregory Sidak, Antitrust Divestiture in Network Industries, 68 U. CHI. L. REV. 1 (2001); Stephen F. Ross, Network Economic Effects and the Limits of GTE Sylvania's Efficiency Analysis, 68 ANTITRUST L.J. 945 (2001); David J. Teece & Mary Coleman, The Meaning of Monopoly: Antitrust Analysis in High-Technology Industries, 43 ANTITRUST BULL. 801 (1998).
16. See, e.g., Nicholas Economides & Lawrence J. White, Networks and Compatibility: Implications for Antitrust, 38 EUR. ECON. REV. 651 (1994); David S. Evans & Richard Schmalensee, A Guide to the Antitrust Economics of Networks, ANTITRUST, Spring 1996, at 36; Michael L. Katz & Carl Shapiro, Antitrust in Software Markets, in COMPETITION, INNOVATION AND THE MICROSOFT MONOPOLY 29 (Jeffrey A. Eisenach & Thomas M. Lenard eds., 1999); William J. Kolasky, Network Effects: A Contrarian View, 7 GEO. MASON L. REV. 577 (1999); Mark A. Lemley & David McGowan, Legal Implications of Network Economic Effects, 86 CAL. L. REV. 479 (1998); S.J. Liebowitz & Stephen E. Margolis, Should Technology Choice Be a Concern of Antitrust Policy?, 9 HARV. J.L & TECH. 283 (1996); A. Douglas Melamed, Network Industries and Antitrust, 23 HARV. J.L. & PUB. POL'Y 147 (1999); Daniel L. Rubinfeld, Antitrust Enforcement in Dynamic Network Industries, 43 ANTITRUST BULL. 859 (1998); Carl Shapiro, Exclusivity in Network Industries, 7 GEO. MASON L. REV. 673 (1999); Howard A. Shelanski & A. Gregory Sidak, Antitrust Divestiture in Network Industries, 68 U. CHI. L. REV. 1 (2001); Stephen F. Ross, Network Economic Effects and the Limits of GTE Sylvania's Efficiency Analysis, 68 ANTITRUST L.J. 945 (2001); David J. Teece & Mary Coleman, The Meaning of Monopoly: Antitrust Analysis in High-Technology Industries, 43 ANTITRUST BULL. 801 (1998).
17. See, e.g., Nicholas Economides & Lawrence J. White, Networks and Compatibility: Implications for Antitrust, 38 EUR. ECON. REV. 651 (1994); David S. Evans & Richard Schmalensee, A Guide to the Antitrust Economics of Networks, ANTITRUST, Spring 1996, at 36; Michael L. Katz & Carl Shapiro, Antitrust in Software Markets, in COMPETITION, INNOVATION AND THE MICROSOFT MONOPOLY 29 (Jeffrey A. Eisenach & Thomas M. Lenard eds., 1999); William J. Kolasky, Network Effects: A Contrarian View, 7 GEO. MASON L. REV. 577 (1999); Mark A. Lemley & David McGowan, Legal Implications of Network Economic Effects, 86 CAL. L. REV. 479 (1998); S.J. Liebowitz & Stephen E. Margolis, Should Technology Choice Be a Concern of Antitrust Policy?, 9 HARV. J.L & TECH. 283 (1996); A. Douglas Melamed, Network Industries and Antitrust, 23 HARV. J.L. & PUB. POL'Y 147 (1999); Daniel L. Rubinfeld, Antitrust Enforcement in Dynamic Network Industries, 43 ANTITRUST BULL. 859 (1998); Carl Shapiro, Exclusivity in Network Industries, 7 GEO. MASON L. REV. 673 (1999); Howard A. Shelanski & A. Gregory Sidak, Antitrust Divestiture in Network Industries, 68 U. CHI. L. REV. 1 (2001); Stephen F. Ross, Network Economic Effects and the Limits of GTE Sylvania's Efficiency Analysis, 68 ANTITRUST L.J. 945 (2001); David J. Teece & Mary Coleman, The Meaning of Monopoly: Antitrust Analysis in High-Technology Industries, 43 ANTITRUST BULL. 801 (1998).
18. See, e.g., Nicholas Economides & Lawrence J. White, Networks and Compatibility: Implications for Antitrust, 38 EUR. ECON. REV. 651 (1994); David S. Evans & Richard Schmalensee, A Guide to the Antitrust Economics of Networks, ANTITRUST, Spring 1996, at 36; Michael L. Katz & Carl Shapiro, Antitrust in Software Markets, in COMPETITION, INNOVATION AND THE MICROSOFT MONOPOLY 29 (Jeffrey A. Eisenach & Thomas M. Lenard eds., 1999); William J. Kolasky, Network Effects: A Contrarian View, 7 GEO. MASON L. REV. 577 (1999); Mark A. Lemley & David McGowan, Legal Implications of Network Economic Effects, 86 CAL. L. REV. 479 (1998); S.J. Liebowitz & Stephen E. Margolis, Should Technology Choice Be a Concern of Antitrust Policy?, 9 HARV. J.L & TECH. 283 (1996); A. Douglas Melamed, Network Industries and Antitrust, 23 HARV. J.L. & PUB. POL'Y 147 (1999); Daniel L. Rubinfeld, Antitrust Enforcement in Dynamic Network Industries, 43 ANTITRUST BULL. 859 (1998); Carl Shapiro, Exclusivity in Network Industries, 7 GEO. MASON L. REV. 673 (1999); Howard A. Shelanski & A. Gregory Sidak, Antitrust Divestiture in Network Industries, 68 U. CHI. L. REV. 1 (2001); Stephen F. Ross, Network Economic Effects and the Limits of GTE Sylvania's Efficiency Analysis, 68 ANTITRUST L.J. 945 (2001); David J. Teece & Mary Coleman, The Meaning of Monopoly: Antitrust Analysis in High-Technology Industries, 43 ANTITRUST BULL. 801 (1998).
19. See, e.g., Nicholas Economides & Lawrence J. White, Networks and Compatibility: Implications for Antitrust, 38 EUR. ECON. REV. 651 (1994); David S. Evans & Richard Schmalensee, A Guide to the Antitrust Economics of Networks, ANTITRUST, Spring 1996, at 36; Michael L. Katz & Carl Shapiro, Antitrust in Software Markets, in COMPETITION, INNOVATION AND THE MICROSOFT MONOPOLY 29 (Jeffrey A. Eisenach & Thomas M. Lenard eds., 1999); William J. Kolasky, Network Effects: A Contrarian View, 7 GEO. MASON L. REV. 577 (1999); Mark A. Lemley & David McGowan, Legal Implications of Network Economic Effects, 86 CAL. L. REV. 479 (1998); S.J. Liebowitz & Stephen E. Margolis, Should Technology Choice Be a Concern of Antitrust Policy?, 9 HARV. J.L & TECH. 283 (1996); A. Douglas Melamed, Network Industries and Antitrust, 23 HARV. J.L. & PUB. POL'Y 147 (1999); Daniel L. Rubinfeld, Antitrust Enforcement in Dynamic Network Industries, 43 ANTITRUST BULL. 859 (1998); Carl Shapiro, Exclusivity in Network Industries, 7 GEO. MASON L. REV. 673 (1999); Howard A. Shelanski & A. Gregory Sidak, Antitrust Divestiture in Network Industries, 68 U. CHI. L. REV. 1 (2001); Stephen F. Ross, Network Economic Effects and the Limits of GTE Sylvania's Efficiency Analysis, 68 ANTITRUST L.J. 945 (2001); David J. Teece & Mary Coleman, The Meaning of Monopoly: Antitrust Analysis in High-Technology Industries, 43 ANTITRUST BULL. 801 (1998).
20. See, e.g., Nicholas Economides & Lawrence J. White, Networks and Compatibility: Implications for Antitrust, 38 EUR. ECON. REV. 651 (1994); David S. Evans & Richard Schmalensee, A Guide to the Antitrust Economics of Networks, ANTITRUST, Spring 1996, at 36; Michael L. Katz & Carl Shapiro, Antitrust in Software Markets, in COMPETITION, INNOVATION AND THE MICROSOFT MONOPOLY 29 (Jeffrey A. Eisenach & Thomas M. Lenard eds., 1999); William J. Kolasky, Network Effects: A Contrarian View, 7 GEO. MASON L. REV. 577 (1999); Mark A. Lemley & David McGowan, Legal Implications of Network Economic Effects, 86 CAL. L. REV. 479 (1998); S.J. Liebowitz & Stephen E. Margolis, Should Technology Choice Be a Concern of Antitrust Policy?, 9 HARV. J.L & TECH. 283 (1996); A. Douglas Melamed, Network Industries and Antitrust, 23 HARV. J.L. & PUB. POL'Y 147 (1999); Daniel L. Rubinfeld, Antitrust Enforcement in Dynamic Network Industries, 43 ANTITRUST BULL. 859 (1998); Carl Shapiro, Exclusivity in Network Industries, 7 GEO. MASON L. REV. 673 (1999); Howard A. Shelanski & A. Gregory Sidak, Antitrust Divestiture in Network Industries, 68 U. CHI. L. REV. 1 (2001); Stephen F. Ross, Network Economic Effects and the Limits of GTE Sylvania's Efficiency Analysis, 68 ANTITRUST L.J. 945 (2001); David J. Teece & Mary Coleman, The Meaning of Monopoly: Antitrust Analysis in High-Technology Industries, 43 ANTITRUST BULL. 801 (1998).
21. See, e.g., Nicholas Economides & Lawrence J. White, Networks and Compatibility: Implications for Antitrust, 38 EUR. ECON. REV. 651 (1994); David S. Evans & Richard Schmalensee, A Guide to the Antitrust Economics of Networks, ANTITRUST, Spring 1996, at 36; Michael L. Katz & Carl Shapiro, Antitrust in Software Markets, in COMPETITION, INNOVATION AND THE MICROSOFT MONOPOLY 29 (Jeffrey A. Eisenach & Thomas M. Lenard eds., 1999); William J. Kolasky, Network Effects: A Contrarian View, 7 GEO. MASON L. REV. 577 (1999); Mark A. Lemley & David McGowan, Legal Implications of Network Economic Effects, 86 CAL. L. REV. 479 (1998); S.J. Liebowitz & Stephen E. Margolis, Should Technology Choice Be a Concern of Antitrust Policy?, 9 HARV. J.L & TECH. 283 (1996); A. Douglas Melamed, Network Industries and Antitrust, 23 HARV. J.L. & PUB. POL'Y 147 (1999); Daniel L. Rubinfeld, Antitrust Enforcement in Dynamic Network Industries, 43 ANTITRUST BULL. 859 (1998); Carl Shapiro, Exclusivity in Network Industries, 7 GEO. MASON L. REV. 673 (1999); Howard A. Shelanski & A. Gregory Sidak, Antitrust Divestiture in Network Industries, 68 U. CHI. L. REV. 1 (2001); Stephen F. Ross, Network Economic Effects and the Limits of GTE Sylvania's Efficiency Analysis, 68 ANTITRUST L.J. 945 (2001); David J. Teece & Mary Coleman, The Meaning of Monopoly: Antitrust Analysis in High-Technology Industries, 43 ANTITRUST BULL. 801 (1998).
22. See, e.g., Nicholas Economides & Lawrence J. White, Networks and Compatibility: Implications for Antitrust, 38 EUR. ECON. REV. 651 (1994); David S. Evans & Richard Schmalensee, A Guide to the Antitrust Economics of Networks, ANTITRUST, Spring 1996, at 36; Michael L. Katz & Carl Shapiro, Antitrust in Software Markets, in COMPETITION, INNOVATION AND THE MICROSOFT MONOPOLY 29 (Jeffrey A. Eisenach & Thomas M. Lenard eds., 1999); William J. Kolasky, Network Effects: A Contrarian View, 7 GEO. MASON L. REV. 577 (1999); Mark A. Lemley & David McGowan, Legal Implications of Network Economic Effects, 86 CAL. L. REV. 479 (1998); S.J. Liebowitz & Stephen E. Margolis, Should Technology Choice Be a Concern of Antitrust Policy?, 9 HARV. J.L & TECH. 283 (1996); A. Douglas Melamed, Network Industries and Antitrust, 23 HARV. J.L. & PUB. POL'Y 147 (1999); Daniel L. Rubinfeld, Antitrust Enforcement in Dynamic Network Industries, 43 ANTITRUST BULL. 859 (1998); Carl Shapiro, Exclusivity in Network Industries, 7 GEO. MASON L. REV. 673 (1999); Howard A. Shelanski & A. Gregory Sidak, Antitrust Divestiture in Network Industries, 68 U. CHI. L. REV. 1 (2001); Stephen F. Ross, Network Economic Effects and the Limits of GTE Sylvania's Efficiency Analysis, 68 ANTITRUST L.J. 945 (2001); David J. Teece & Mary Coleman, The Meaning of Monopoly: Antitrust Analysis in High-Technology Industries, 43 ANTITRUST BULL. 801 (1998).
23. United States v. Microsoft Corp., 84 F. Supp. 2d 9 (D.D.C. 1999) (Findings of Fact), 87 F. Supp. 2d 30 (D.D.C. 2000) (Conclusions of Law), 97 F. Supp. 2d 59 (D.D.C. 2000) (Order), appeal docketed, Nos. 00-5212-13 (D.C. Cir. June 13, 2000). For discussions of network effects in the Microsoft case, see STAN J. LIEBOWITZ & STEPHEN E. MARGOLIS, WINNERS, LOSERS & MICROSOFT (1999); Nicholas Economides, The Microsoft Antitrust Case (Stern School of Business, Working Paper 2000-09, Nov. 18, 2000); Kenneth G. Elzinga & David E. Mills, PC Software, 44 ANTITRUST BULL. 739 (1999); Franklin M. Fisher, The IBM and Microsoft Cases: What's the Difference, 90 AM. ECON. REV. (PAPERS & PROC.) 180 (2000); Franklin M. Fisher, Innovative Industries and Antitrust: Implications of the Microsoft Case, J. INDUSTRY, COMPETITION & TRADE (forthcoming); Stan Liebowitz & Stephen E. Margolis, Network Effects and the Microsoft Case, in DYNAMIC COMPETITION AND PUBLIC POLICY (Jerry Ellig ed., 2001); John E. Lopatka & William H. Page, Antitrust on Internet Time: Microsoft and the Law and Economics of Exclusion, 7 SUP. CT. ECON. REV. 157 (1999); John E. Lopatka & William H. Page, Microsoft, Monopolization, and Network Externalities: Some Abuses of Economic Theory in Antitrust Decision Making, 40 ANTITRUST BULL. 317 (1995); Steven C. Salop & R. Craig Romaine, Preserving Monopoly: Economic Analysis, Legal Standards, and Microsoft, 7 GEO. MASON L. REV. 617 (1999); Willow A. Sheremata, Barriers to Innovation: A Monopoly, Network Externalities, and the Speed of Innovation, 42 ANTITRUST BULL. 937 (1997); Richard A. Schmalensee, Antitrust Issues in Schumpeterian Industries, 90 AM. ECON. REV. (PAP. & PROC.) 192 (2000); Note, Antitrust and the Information Age: Section 2 Monopolization Analyses in the New Economy, 114 HARV. L. REV. 1623 (2001).
24. United States v. Microsoft Corp., 84 F. Supp. 2d 9 (D.D.C. 1999) (Findings of Fact), 87 F. Supp. 2d 30 (D.D.C. 2000) (Conclusions of Law), 97 F. Supp. 2d 59 (D.D.C. 2000) (Order), appeal docketed, Nos. 00-5212-13 (D.C. Cir. June 13, 2000). For discussions of network effects in the Microsoft case, see STAN J. LIEBOWITZ & STEPHEN E. MARGOLIS, WINNERS, LOSERS & MICROSOFT (1999); Nicholas Economides, The Microsoft Antitrust Case (Stern School of Business, Working Paper 2000-09, Nov. 18, 2000); Kenneth G. Elzinga & David E. Mills, PC Software, 44 ANTITRUST BULL. 739 (1999); Franklin M. Fisher, The IBM and Microsoft Cases: What's the Difference, 90 AM. ECON. REV. (PAPERS & PROC.) 180 (2000); Franklin M. Fisher, Innovative Industries and Antitrust: Implications of the Microsoft Case, J. INDUSTRY, COMPETITION & TRADE (forthcoming); Stan Liebowitz & Stephen E. Margolis, Network Effects and the Microsoft Case, in DYNAMIC COMPETITION AND PUBLIC POLICY (Jerry Ellig ed., 2001); John E. Lopatka & William H. Page, Antitrust on Internet Time: Microsoft and the Law and Economics of Exclusion, 7 SUP. CT. ECON. REV. 157 (1999); John E. Lopatka & William H. Page, Microsoft, Monopolization, and Network Externalities: Some Abuses of Economic Theory in Antitrust Decision Making, 40 ANTITRUST BULL. 317 (1995); Steven C. Salop & R. Craig Romaine, Preserving Monopoly: Economic Analysis, Legal Standards, and Microsoft, 7 GEO. MASON L. REV. 617 (1999); Willow A. Sheremata, Barriers to Innovation: A Monopoly, Network Externalities, and the Speed of Innovation, 42 ANTITRUST BULL. 937 (1997); Richard A. Schmalensee, Antitrust Issues in Schumpeterian Industries, 90 AM. ECON. REV. (PAP. & PROC.) 192 (2000); Note, Antitrust and the Information Age: Section 2 Monopolization Analyses in the New Economy, 114 HARV. L. REV. 1623 (2001).
25. United States v. Microsoft Corp., 84 F. Supp. 2d 9 (D.D.C. 1999) (Findings of Fact), 87 F. Supp. 2d 30 (D.D.C. 2000) (Conclusions of Law), 97 F. Supp. 2d 59 (D.D.C. 2000) (Order), appeal docketed, Nos. 00-5212-13 (D.C. Cir. June 13, 2000). For discussions of network effects in the Microsoft case, see STAN J. LIEBOWITZ & STEPHEN E. MARGOLIS, WINNERS, LOSERS & MICROSOFT (1999); Nicholas Economides, The Microsoft Antitrust Case (Stern School of Business, Working Paper 2000-09, Nov. 18, 2000); Kenneth G. Elzinga & David E. Mills, PC Software, 44 ANTITRUST BULL. 739 (1999); Franklin M. Fisher, The IBM and Microsoft Cases: What's the Difference, 90 AM. ECON. REV. (PAPERS & PROC.) 180 (2000); Franklin M. Fisher, Innovative Industries and Antitrust: Implications of the Microsoft Case, J. INDUSTRY, COMPETITION & TRADE (forthcoming); Stan Liebowitz & Stephen E. Margolis, Network Effects and the Microsoft Case, in DYNAMIC COMPETITION AND PUBLIC POLICY (Jerry Ellig ed., 2001); John E. Lopatka & William H. Page, Antitrust on Internet Time: Microsoft and the Law and Economics of Exclusion, 7 SUP. CT. ECON. REV. 157 (1999); John E. Lopatka & William H. Page, Microsoft, Monopolization, and Network Externalities: Some Abuses of Economic Theory in Antitrust Decision Making, 40 ANTITRUST BULL. 317 (1995); Steven C. Salop & R. Craig Romaine, Preserving Monopoly: Economic Analysis, Legal Standards, and Microsoft, 7 GEO. MASON L. REV. 617 (1999); Willow A. Sheremata, Barriers to Innovation: A Monopoly, Network Externalities, and the Speed of Innovation, 42 ANTITRUST BULL. 937 (1997); Richard A. Schmalensee, Antitrust Issues in Schumpeterian Industries, 90 AM. ECON. REV. (PAP. & PROC.) 192 (2000); Note, Antitrust and the Information Age: Section 2 Monopolization Analyses in the New Economy, 114 HARV. L. REV. 1623 (2001).
26. United States v. Microsoft Corp., 84 F. Supp. 2d 9 (D.D.C. 1999) (Findings of Fact), 87 F. Supp. 2d 30 (D.D.C. 2000) (Conclusions of Law), 97 F. Supp. 2d 59 (D.D.C. 2000) (Order), appeal docketed, Nos. 00-5212-13 (D.C. Cir. June 13, 2000). For discussions of network effects in the Microsoft case, see STAN J. LIEBOWITZ & STEPHEN E. MARGOLIS, WINNERS, LOSERS & MICROSOFT (1999); Nicholas Economides, The Microsoft Antitrust Case (Stern School of Business, Working Paper 2000-09, Nov. 18, 2000); Kenneth G. Elzinga & David E. Mills, PC Software, 44 ANTITRUST BULL. 739 (1999); Franklin M. Fisher, The IBM and Microsoft Cases: What's the Difference, 90 AM. ECON. REV. (PAPERS & PROC.) 180 (2000); Franklin M. Fisher, Innovative Industries and Antitrust: Implications of the Microsoft Case, J. INDUSTRY, COMPETITION & TRADE (forthcoming); Stan Liebowitz & Stephen E. Margolis, Network Effects and the Microsoft Case, in DYNAMIC COMPETITION AND PUBLIC POLICY (Jerry Ellig ed., 2001); John E. Lopatka & William H. Page, Antitrust on Internet Time: Microsoft and the Law and Economics of Exclusion, 7 SUP. CT. ECON. REV. 157 (1999); John E. Lopatka & William H. Page, Microsoft, Monopolization, and Network Externalities: Some Abuses of Economic Theory in Antitrust Decision Making, 40 ANTITRUST BULL. 317 (1995); Steven C. Salop & R. Craig Romaine, Preserving Monopoly: Economic Analysis, Legal Standards, and Microsoft, 7 GEO. MASON L. REV. 617 (1999); Willow A. Sheremata, Barriers to Innovation: A Monopoly, Network Externalities, and the Speed of Innovation, 42 ANTITRUST BULL. 937 (1997); Richard A. Schmalensee, Antitrust Issues in Schumpeterian Industries, 90 AM. ECON. REV. (PAP. & PROC.) 192 (2000); Note, Antitrust and the Information Age: Section 2 Monopolization Analyses in the New Economy, 114 HARV. L. REV. 1623 (2001).
27. United States v. Microsoft Corp., 84 F. Supp. 2d 9 (D.D.C. 1999) (Findings of Fact), 87 F. Supp. 2d 30 (D.D.C. 2000) (Conclusions of Law), 97 F. Supp. 2d 59 (D.D.C. 2000) (Order), appeal docketed, Nos. 00-5212-13 (D.C. Cir. June 13, 2000). For discussions of network effects in the Microsoft case, see STAN J. LIEBOWITZ & STEPHEN E. MARGOLIS, WINNERS, LOSERS & MICROSOFT (1999); Nicholas Economides, The Microsoft Antitrust Case (Stern School of Business, Working Paper 2000-09, Nov. 18, 2000); Kenneth G. Elzinga & David E. Mills, PC Software, 44 ANTITRUST BULL. 739 (1999); Franklin M. Fisher, The IBM and Microsoft Cases: What's the Difference, 90 AM. ECON. REV. (PAPERS & PROC.) 180 (2000); Franklin M. Fisher, Innovative Industries and Antitrust: Implications of the Microsoft Case, J. INDUSTRY, COMPETITION & TRADE (forthcoming); Stan Liebowitz & Stephen E. Margolis, Network Effects and the Microsoft Case, in DYNAMIC COMPETITION AND PUBLIC POLICY (Jerry Ellig ed., 2001); John E. Lopatka & William H. Page, Antitrust on Internet Time: Microsoft and the Law and Economics of Exclusion, 7 SUP. CT. ECON. REV. 157 (1999); John E. Lopatka & William H. Page, Microsoft, Monopolization, and Network Externalities: Some Abuses of Economic Theory in Antitrust Decision Making, 40 ANTITRUST BULL. 317 (1995); Steven C. Salop & R. Craig Romaine, Preserving Monopoly: Economic Analysis, Legal Standards, and Microsoft, 7 GEO. MASON L. REV. 617 (1999); Willow A. Sheremata, Barriers to Innovation: A Monopoly, Network Externalities, and the Speed of Innovation, 42 ANTITRUST BULL. 937 (1997); Richard A. Schmalensee, Antitrust Issues in Schumpeterian Industries, 90 AM. ECON. REV. (PAP. & PROC.) 192 (2000); Note, Antitrust and the Information Age: Section 2 Monopolization Analyses in the New Economy, 114 HARV. L. REV. 1623 (2001).
28. United States v. Microsoft Corp., 84 F. Supp. 2d 9 (D.D.C. 1999) (Findings of Fact), 87 F. Supp. 2d 30 (D.D.C. 2000) (Conclusions of Law), 97 F. Supp. 2d 59 (D.D.C. 2000) (Order), appeal docketed, Nos. 00-5212-13 (D.C. Cir. June 13, 2000). For discussions of network effects in the Microsoft case, see STAN J. LIEBOWITZ & STEPHEN E. MARGOLIS, WINNERS, LOSERS & MICROSOFT (1999); Nicholas Economides, The Microsoft Antitrust Case (Stern School of Business, Working Paper 2000-09, Nov. 18, 2000); Kenneth G. Elzinga & David E. Mills, PC Software, 44 ANTITRUST BULL. 739 (1999); Franklin M. Fisher, The IBM and Microsoft Cases: What's the Difference, 90 AM. ECON. REV. (PAPERS & PROC.) 180 (2000); Franklin M. Fisher, Innovative Industries and Antitrust: Implications of the Microsoft Case, J. INDUSTRY, COMPETITION & TRADE (forthcoming); Stan Liebowitz & Stephen E. Margolis, Network Effects and the Microsoft Case, in DYNAMIC COMPETITION AND PUBLIC POLICY (Jerry Ellig ed., 2001); John E. Lopatka & William H. Page, Antitrust on Internet Time: Microsoft and the Law and Economics of Exclusion, 7 SUP. CT. ECON. REV. 157 (1999); John E. Lopatka & William H. Page, Microsoft, Monopolization, and Network Externalities: Some Abuses of Economic Theory in Antitrust Decision Making, 40 ANTITRUST BULL. 317 (1995); Steven C. Salop & R. Craig Romaine, Preserving Monopoly: Economic Analysis, Legal Standards, and Microsoft, 7 GEO. MASON L. REV. 617 (1999); Willow A. Sheremata, Barriers to Innovation: A Monopoly, Network Externalities, and the Speed of Innovation, 42 ANTITRUST BULL. 937 (1997); Richard A. Schmalensee, Antitrust Issues in Schumpeterian Industries, 90 AM. ECON. REV. (PAP. & PROC.) 192 (2000); Note, Antitrust and the Information Age: Section 2 Monopolization Analyses in the New Economy, 114 HARV. L. REV. 1623 (2001).
29. United States v. Microsoft Corp., 84 F. Supp. 2d 9 (D.D.C. 1999) (Findings of Fact), 87 F. Supp. 2d 30 (D.D.C. 2000) (Conclusions of Law), 97 F. Supp. 2d 59 (D.D.C. 2000) (Order), appeal docketed, Nos. 00-5212-13 (D.C. Cir. June 13, 2000). For discussions of network effects in the Microsoft case, see STAN J. LIEBOWITZ & STEPHEN E. MARGOLIS, WINNERS, LOSERS & MICROSOFT (1999); Nicholas Economides, The Microsoft Antitrust Case (Stern School of Business, Working Paper 2000-09, Nov. 18, 2000); Kenneth G. Elzinga & David E. Mills, PC Software, 44 ANTITRUST BULL. 739 (1999); Franklin M. Fisher, The IBM and Microsoft Cases: What's the Difference, 90 AM. ECON. REV. (PAPERS & PROC.) 180 (2000); Franklin M. Fisher, Innovative Industries and Antitrust: Implications of the Microsoft Case, J. INDUSTRY, COMPETITION & TRADE (forthcoming); Stan Liebowitz & Stephen E. Margolis, Network Effects and the Microsoft Case, in DYNAMIC COMPETITION AND PUBLIC POLICY (Jerry Ellig ed., 2001); John E. Lopatka & William H. Page, Antitrust on Internet Time: Microsoft and the Law and Economics of Exclusion, 7 SUP. CT. ECON. REV. 157 (1999); John E. Lopatka & William H. Page, Microsoft, Monopolization, and Network Externalities: Some Abuses of Economic Theory in Antitrust Decision Making, 40 ANTITRUST BULL. 317 (1995); Steven C. Salop & R. Craig Romaine, Preserving Monopoly: Economic Analysis, Legal Standards, and Microsoft, 7 GEO. MASON L. REV. 617 (1999); Willow A. Sheremata, Barriers to Innovation: A Monopoly, Network Externalities, and the Speed of Innovation, 42 ANTITRUST BULL. 937 (1997); Richard A. Schmalensee, Antitrust Issues in Schumpeterian Industries, 90 AM. ECON. REV. (PAP. & PROC.) 192 (2000); Note, Antitrust and the Information Age: Section 2 Monopolization Analyses in the New Economy, 114 HARV. L. REV. 1623 (2001).
30. United States v. Microsoft Corp., 84 F. Supp. 2d 9 (D.D.C. 1999) (Findings of Fact), 87 F. Supp. 2d 30 (D.D.C. 2000) (Conclusions of Law), 97 F. Supp. 2d 59 (D.D.C. 2000) (Order), appeal docketed, Nos. 00-5212-13 (D.C. Cir. June 13, 2000). For discussions of network effects in the Microsoft case, see STAN J. LIEBOWITZ & STEPHEN E. MARGOLIS, WINNERS, LOSERS & MICROSOFT (1999); Nicholas Economides, The Microsoft Antitrust Case (Stern School of Business, Working Paper 2000-09, Nov. 18, 2000); Kenneth G. Elzinga & David E. Mills, PC Software, 44 ANTITRUST BULL. 739 (1999); Franklin M. Fisher, The IBM and Microsoft Cases: What's the Difference, 90 AM. ECON. REV. (PAPERS & PROC.) 180 (2000); Franklin M. Fisher, Innovative Industries and Antitrust: Implications of the Microsoft Case, J. INDUSTRY, COMPETITION & TRADE (forthcoming); Stan Liebowitz & Stephen E. Margolis, Network Effects and the Microsoft Case, in DYNAMIC COMPETITION AND PUBLIC POLICY (Jerry Ellig ed., 2001); John E. Lopatka & William H. Page, Antitrust on Internet Time: Microsoft and the Law and Economics of Exclusion, 7 SUP. CT. ECON. REV. 157 (1999); John E. Lopatka & William H. Page, Microsoft, Monopolization, and Network Externalities: Some Abuses of Economic Theory in Antitrust Decision Making, 40 ANTITRUST BULL. 317 (1995); Steven C. Salop & R. Craig Romaine, Preserving Monopoly: Economic Analysis, Legal Standards, and Microsoft, 7 GEO. MASON L. REV. 617 (1999); Willow A. Sheremata, Barriers to Innovation: A Monopoly, Network Externalities, and the Speed of Innovation, 42 ANTITRUST BULL. 937 (1997); Richard A. Schmalensee, Antitrust Issues in Schumpeterian Industries, 90 AM. ECON. REV. (PAP. & PROC.) 192 (2000); Note, Antitrust and the Information Age: Section 2 Monopolization Analyses in the New Economy, 114 HARV. L. REV. 1623 (2001).
31. United States v. Microsoft Corp., 84 F. Supp. 2d 9 (D.D.C. 1999) (Findings of Fact), 87 F. Supp. 2d 30 (D.D.C. 2000) (Conclusions of Law), 97 F. Supp. 2d 59 (D.D.C. 2000) (Order), appeal docketed, Nos. 00-5212-13 (D.C. Cir. June 13, 2000). For discussions of network effects in the Microsoft case, see STAN J. LIEBOWITZ & STEPHEN E. MARGOLIS, WINNERS, LOSERS & MICROSOFT (1999); Nicholas Economides, The Microsoft Antitrust Case (Stern School of Business, Working Paper 2000-09, Nov. 18, 2000); Kenneth G. Elzinga & David E. Mills, PC Software, 44 ANTITRUST BULL. 739 (1999); Franklin M. Fisher, The IBM and Microsoft Cases: What's the Difference, 90 AM. ECON. REV. (PAPERS & PROC.) 180 (2000); Franklin M. Fisher, Innovative Industries and Antitrust: Implications of the Microsoft Case, J. INDUSTRY, COMPETITION & TRADE (forthcoming); Stan Liebowitz & Stephen E. Margolis, Network Effects and the Microsoft Case, in DYNAMIC COMPETITION AND PUBLIC POLICY (Jerry Ellig ed., 2001); John E. Lopatka & William H. Page, Antitrust on Internet Time: Microsoft and the Law and Economics of Exclusion, 7 SUP. CT. ECON. REV. 157 (1999); John E. Lopatka & William H. Page, Microsoft, Monopolization, and Network Externalities: Some Abuses of Economic Theory in Antitrust Decision Making, 40 ANTITRUST BULL. 317 (1995); Steven C. Salop & R. Craig Romaine, Preserving Monopoly: Economic Analysis, Legal Standards, and Microsoft, 7 GEO. MASON L. REV. 617 (1999); Willow A. Sheremata, Barriers to Innovation: A Monopoly, Network Externalities, and the Speed of Innovation, 42 ANTITRUST BULL. 937 (1997); Richard A. Schmalensee, Antitrust Issues in Schumpeterian Industries, 90 AM. ECON. REV. (PAP. & PROC.) 192 (2000); Note, Antitrust and the Information Age: Section 2 Monopolization Analyses in the New Economy, 114 HARV. L. REV. 1623 (2001).
32. United States v. Microsoft Corp., 84 F. Supp. 2d 9 (D.D.C. 1999) (Findings of Fact), 87 F. Supp. 2d 30 (D.D.C. 2000) (Conclusions of Law), 97 F. Supp. 2d 59 (D.D.C. 2000) (Order), appeal docketed, Nos. 00-5212-13 (D.C. Cir. June 13, 2000). For discussions of network effects in the Microsoft case, see STAN J. LIEBOWITZ & STEPHEN E. MARGOLIS, WINNERS, LOSERS & MICROSOFT (1999); Nicholas Economides, The Microsoft Antitrust Case (Stern School of Business, Working Paper 2000-09, Nov. 18, 2000); Kenneth G. Elzinga & David E. Mills, PC Software, 44 ANTITRUST BULL. 739 (1999); Franklin M. Fisher, The IBM and Microsoft Cases: What's the Difference, 90 AM. ECON. REV. (PAPERS & PROC.) 180 (2000); Franklin M. Fisher, Innovative Industries and Antitrust: Implications of the Microsoft Case, J. INDUSTRY, COMPETITION & TRADE (forthcoming); Stan Liebowitz & Stephen E. Margolis, Network Effects and the Microsoft Case, in DYNAMIC COMPETITION AND PUBLIC POLICY (Jerry Ellig ed., 2001); John E. Lopatka & William H. Page, Antitrust on Internet Time: Microsoft and the Law and Economics of Exclusion, 7 SUP. CT. ECON. REV. 157 (1999); John E. Lopatka & William H. Page, Microsoft, Monopolization, and Network Externalities: Some Abuses of Economic Theory in Antitrust Decision Making, 40 ANTITRUST BULL. 317 (1995); Steven C. Salop & R. Craig Romaine, Preserving Monopoly: Economic Analysis, Legal Standards, and Microsoft, 7 GEO. MASON L. REV. 617 (1999); Willow A. Sheremata, Barriers to Innovation: A Monopoly, Network Externalities, and the Speed of Innovation, 42 ANTITRUST BULL. 937 (1997); Richard A. Schmalensee, Antitrust Issues in Schumpeterian Industries, 90 AM. ECON. REV. (PAP. & PROC.) 192 (2000); Note, Antitrust and the Information Age: Section 2 Monopolization Analyses in the New Economy, 114 HARV. L. REV. 1623 (2001).
33. United States v. Microsoft Corp., 84 F. Supp. 2d 9 (D.D.C. 1999) (Findings of Fact), 87 F. Supp. 2d 30 (D.D.C. 2000) (Conclusions of Law), 97 F. Supp. 2d 59 (D.D.C. 2000) (Order), appeal docketed, Nos. 00-5212-13 (D.C. Cir. June 13, 2000). For discussions of network effects in the Microsoft case, see STAN J. LIEBOWITZ & STEPHEN E. MARGOLIS, WINNERS, LOSERS & MICROSOFT (1999); Nicholas Economides, The Microsoft Antitrust Case (Stern School of Business, Working Paper 2000-09, Nov. 18, 2000); Kenneth G. Elzinga & David E. Mills, PC Software, 44 ANTITRUST BULL. 739 (1999); Franklin M. Fisher, The IBM and Microsoft Cases: What's the Difference, 90 AM. ECON. REV. (PAPERS & PROC.) 180 (2000); Franklin M. Fisher, Innovative Industries and Antitrust: Implications of the Microsoft Case, J. INDUSTRY, COMPETITION & TRADE (forthcoming); Stan Liebowitz & Stephen E. Margolis, Network Effects and the Microsoft Case, in DYNAMIC COMPETITION AND PUBLIC POLICY (Jerry Ellig ed., 2001); John E. Lopatka & William H. Page, Antitrust on Internet Time: Microsoft and the Law and Economics of Exclusion, 7 SUP. CT. ECON. REV. 157 (1999); John E. Lopatka & William H. Page, Microsoft, Monopolization, and Network Externalities: Some Abuses of Economic Theory in Antitrust Decision Making, 40 ANTITRUST BULL. 317 (1995); Steven C. Salop & R. Craig Romaine, Preserving Monopoly: Economic Analysis, Legal Standards, and Microsoft, 7 GEO. MASON L. REV. 617 (1999); Willow A. Sheremata, Barriers to Innovation: A Monopoly, Network Externalities, and the Speed of Innovation, 42 ANTITRUST BULL. 937 (1997); Richard A. Schmalensee, Antitrust Issues in Schumpeterian Industries, 90 AM. ECON. REV. (PAP. & PROC.) 192 (2000); Note, Antitrust and the Information Age: Section 2 Monopolization Analyses in the New Economy, 114 HARV. L. REV. 1623 (2001).
34. United States v. Microsoft Corp., 84 F. Supp. 2d 9 (D.D.C. 1999) (Findings of Fact), 87 F. Supp. 2d 30 (D.D.C. 2000) (Conclusions of Law), 97 F. Supp. 2d 59 (D.D.C. 2000) (Order), appeal docketed, Nos. 00-5212-13 (D.C. Cir. June 13, 2000). For discussions of network effects in the Microsoft case, see STAN J. LIEBOWITZ & STEPHEN E. MARGOLIS, WINNERS, LOSERS & MICROSOFT (1999); Nicholas Economides, The Microsoft Antitrust Case (Stern School of Business, Working Paper 2000-09, Nov. 18, 2000); Kenneth G. Elzinga & David E. Mills, PC Software, 44 ANTITRUST BULL. 739 (1999); Franklin M. Fisher, The IBM and Microsoft Cases: What's the Difference, 90 AM. ECON. REV. (PAPERS & PROC.) 180 (2000); Franklin M. Fisher, Innovative Industries and Antitrust: Implications of the Microsoft Case, J. INDUSTRY, COMPETITION & TRADE (forthcoming); Stan Liebowitz & Stephen E. Margolis, Network Effects and the Microsoft Case, in DYNAMIC COMPETITION AND PUBLIC POLICY (Jerry Ellig ed., 2001); John E. Lopatka & William H. Page, Antitrust on Internet Time: Microsoft and the Law and Economics of Exclusion, 7 SUP. CT. ECON. REV. 157 (1999); John E. Lopatka & William H. Page, Microsoft, Monopolization, and Network Externalities: Some Abuses of Economic Theory in Antitrust Decision Making, 40 ANTITRUST BULL. 317 (1995); Steven C. Salop & R. Craig Romaine, Preserving Monopoly: Economic Analysis, Legal Standards, and Microsoft, 7 GEO. MASON L. REV. 617 (1999); Willow A. Sheremata, Barriers to Innovation: A Monopoly, Network Externalities, and the Speed of Innovation, 42 ANTITRUST BULL. 937 (1997); Richard A. Schmalensee, Antitrust Issues in Schumpeterian Industries, 90 AM. ECON. REV. (PAP. & PROC.) 192 (2000); Note, Antitrust and the Information Age: Section 2 Monopolization Analyses in the New Economy, 114 HARV. L. REV. 1623 (2001).
35. United States v. Microsoft Corp., 84 F. Supp. 2d 9 (D.D.C. 1999) (Findings of Fact), 87 F. Supp. 2d 30 (D.D.C. 2000) (Conclusions of Law), 97 F. Supp. 2d 59 (D.D.C. 2000) (Order), appeal docketed, Nos. 00-5212-13 (D.C. Cir. June 13, 2000). For discussions of network effects in the Microsoft case, see STAN J. LIEBOWITZ & STEPHEN E. MARGOLIS, WINNERS, LOSERS & MICROSOFT (1999); Nicholas Economides, The Microsoft Antitrust Case (Stern School of Business, Working Paper 2000-09, Nov. 18, 2000); Kenneth G. Elzinga & David E. Mills, PC Software, 44 ANTITRUST BULL. 739 (1999); Franklin M. Fisher, The IBM and Microsoft Cases: What's the Difference, 90 AM. ECON. REV. (PAPERS & PROC.) 180 (2000); Franklin M. Fisher, Innovative Industries and Antitrust: Implications of the Microsoft Case, J. INDUSTRY, COMPETITION & TRADE (forthcoming); Stan Liebowitz & Stephen E. Margolis, Network Effects and the Microsoft Case, in DYNAMIC COMPETITION AND PUBLIC POLICY (Jerry Ellig ed., 2001); John E. Lopatka & William H. Page, Antitrust on Internet Time: Microsoft and the Law and Economics of Exclusion, 7 SUP. CT. ECON. REV. 157 (1999); John E. Lopatka & William H. Page, Microsoft, Monopolization, and Network Externalities: Some Abuses of Economic Theory in Antitrust Decision Making, 40 ANTITRUST BULL. 317 (1995); Steven C. Salop & R. Craig Romaine, Preserving Monopoly: Economic Analysis, Legal Standards, and Microsoft, 7 GEO. MASON L. REV. 617 (1999); Willow A. Sheremata, Barriers to Innovation: A Monopoly, Network Externalities, and the Speed of Innovation, 42 ANTITRUST BULL. 937 (1997); Richard A. Schmalensee, Antitrust Issues in Schumpeterian Industries, 90 AM. ECON. REV. (PAP. & PROC.) 192 (2000); Note, Antitrust and the Information Age: Section 2 Monopolization Analyses in the New Economy, 114 HARV. L. REV. 1623 (2001).
36. United States v. Microsoft Corp., 84 F. Supp. 2d 9 (D.D.C. 1999) (Findings of Fact), 87 F. Supp. 2d 30 (D.D.C. 2000) (Conclusions of Law), 97 F. Supp. 2d 59 (D.D.C. 2000) (Order), appeal docketed, Nos. 00-5212-13 (D.C. Cir. June 13, 2000). For discussions of network effects in the Microsoft case, see STAN J. LIEBOWITZ & STEPHEN E. MARGOLIS, WINNERS, LOSERS & MICROSOFT (1999); Nicholas Economides, The Microsoft Antitrust Case (Stern School of Business, Working Paper 2000-09, Nov. 18, 2000); Kenneth G. Elzinga & David E. Mills, PC Software, 44 ANTITRUST BULL. 739 (1999); Franklin M. Fisher, The IBM and Microsoft Cases: What's the Difference, 90 AM. ECON. REV. (PAPERS & PROC.) 180 (2000); Franklin M. Fisher, Innovative Industries and Antitrust: Implications of the Microsoft Case, J. INDUSTRY, COMPETITION & TRADE (forthcoming); Stan Liebowitz & Stephen E. Margolis, Network Effects and the Microsoft Case, in DYNAMIC COMPETITION AND PUBLIC POLICY (Jerry Ellig ed., 2001); John E. Lopatka & William H. Page, Antitrust on Internet Time: Microsoft and the Law and Economics of Exclusion, 7 SUP. CT. ECON. REV. 157 (1999); John E. Lopatka & William H. Page, Microsoft, Monopolization, and Network Externalities: Some Abuses of Economic Theory in Antitrust Decision Making, 40 ANTITRUST BULL. 317 (1995); Steven C. Salop & R. Craig Romaine, Preserving Monopoly: Economic Analysis, Legal Standards, and Microsoft, 7 GEO. MASON L. REV. 617 (1999); Willow A. Sheremata, Barriers to Innovation: A Monopoly, Network Externalities, and the Speed of Innovation, 42 ANTITRUST BULL. 937 (1997); Richard A. Schmalensee, Antitrust Issues in Schumpeterian Industries, 90 AM. ECON. REV. (PAP. & PROC.) 192 (2000); Note, Antitrust and the Information Age: Section 2 Monopolization Analyses in the New Economy, 114 HARV. L. REV. 1623 (2001).
37. United States v. Microsoft Corp., 84 F. Supp. 2d 9 (D.D.C. 1999) (Findings of Fact), 87 F. Supp. 2d 30 (D.D.C. 2000) (Conclusions of Law), 97 F. Supp. 2d 59 (D.D.C. 2000) (Order), appeal docketed, Nos. 00-5212-13 (D.C. Cir. June 13, 2000). For discussions of network effects in the Microsoft case, see STAN J. LIEBOWITZ & STEPHEN E. MARGOLIS, WINNERS, LOSERS & MICROSOFT (1999); Nicholas Economides, The Microsoft Antitrust Case (Stern School of Business, Working Paper 2000-09, Nov. 18, 2000); Kenneth G. Elzinga & David E. Mills, PC Software, 44 ANTITRUST BULL. 739 (1999); Franklin M. Fisher, The IBM and Microsoft Cases: What's the Difference, 90 AM. ECON. REV. (PAPERS & PROC.) 180 (2000); Franklin M. Fisher, Innovative Industries and Antitrust: Implications of the Microsoft Case, J. INDUSTRY, COMPETITION & TRADE (forthcoming); Stan Liebowitz & Stephen E. Margolis, Network Effects and the Microsoft Case, in DYNAMIC COMPETITION AND PUBLIC POLICY (Jerry Ellig ed., 2001); John E. Lopatka & William H. Page, Antitrust on Internet Time: Microsoft and the Law and Economics of Exclusion, 7 SUP. CT. ECON. REV. 157 (1999); John E. Lopatka & William H. Page, Microsoft, Monopolization, and Network Externalities: Some Abuses of Economic Theory in Antitrust Decision Making, 40 ANTITRUST BULL. 317 (1995); Steven C. Salop & R. Craig Romaine, Preserving Monopoly: Economic Analysis, Legal Standards, and Microsoft, 7 GEO. MASON L. REV. 617 (1999); Willow A. Sheremata, Barriers to Innovation: A Monopoly, Network Externalities, and the Speed of Innovation, 42 ANTITRUST BULL. 937 (1997); Richard A. Schmalensee, Antitrust Issues in Schumpeterian Industries, 90 AM. ECON. REV. (PAP. & PROC.) 192 (2000); Note, Antitrust and the Information Age: Section 2 Monopolization Analyses in the New Economy, 114 HARV. L. REV. 1623 (2001).
38. See infra notes 26-36 and accompanying text.
39. See 84 F. Supp. 2d at 17-18, 28-34, 43-71 (Findings of Fact ¶¶ 29, 68-93, 133-247).
40. For other non-technical discussions of the economics of networks, see CARL SHAPIRO & HAL R. VARIAN, INFORMATION RULES ch. 7 (1999); S.J. Liebowitz & Stephen E. Margolis, Network Effects and Externalities, in 2 THE NEW PALGRAVE DICTIONARY OF ECONOMICS AND THE LAW 671 (Peter Newman ed., 1998); Nicholas Economides, The Economics of Networks, 14 INT'L J. INDUS. ORG. 673 (1996).
41. For other non-technical discussions of the economics of networks, see CARL SHAPIRO & HAL R. VARIAN, INFORMATION RULES ch. 7 (1999); S.J. Liebowitz & Stephen E. Margolis, Network Effects and Externalities, in 2 THE NEW PALGRAVE DICTIONARY OF ECONOMICS AND THE LAW 671 (Peter Newman ed., 1998); Nicholas Economides, The Economics of Networks, 14 INT'L J. INDUS. ORG. 673 (1996).
42. For other non-technical discussions of the economics of networks, see CARL SHAPIRO & HAL R. VARIAN, INFORMATION RULES ch. 7 (1999); S.J. Liebowitz & Stephen E. Margolis, Network Effects and Externalities, in 2 THE NEW PALGRAVE DICTIONARY OF ECONOMICS AND THE LAW 671 (Peter Newman ed., 1998); Nicholas Economides, The Economics of Networks, 14 INT'L J. INDUS. ORG. 673 (1996).
43. This possibility was discussed in economic literature long before the concept of network effects was introduced. See Harvey Leibenstein, Bandwagon, Snob, and Veblen Effects in the Theory of Consumers' Demand, 64 Q.J. ECON. 183 (1950).
44. See generally Michael L. Katz & Carl Shapiro, Technology Adoption in the Presence of Network Externalities, 94 J. POL. ECON. 822 (1986); Michael L. Katz & Carl Shapiro, Network Externalities, Competition, and Compatibility, 75 AM. ECON. REV. 424 (1985). Production in "network industries," e.g., airlines, electric power, and telecommunications (see, e.g., DEREGULATION OF NETWORK INDUSTRIES (Sam Peltzman & Clifford Winston eds., 2000)), involves physical networks, which also have important implications for conditions of entry, but "network effects" relate to demand rather than production.
45. See generally Michael L. Katz & Carl Shapiro, Technology Adoption in the Presence of Network Externalities, 94 J. POL. ECON. 822 (1986); Michael L. Katz & Carl Shapiro, Network Externalities, Competition, and Compatibility, 75 AM. ECON. REV. 424 (1985). Production in "network industries," e.g., airlines, electric power, and telecommunications (see, e.g., DEREGULATION OF NETWORK INDUSTRIES (Sam Peltzman & Clifford Winston eds., 2000)), involves physical networks, which also have important implications for conditions of entry, but "network effects" relate to demand rather than production.
46. See generally Michael L. Katz & Carl Shapiro, Technology Adoption in the Presence of Network Externalities, 94 J. POL. ECON. 822 (1986); Michael L. Katz & Carl Shapiro, Network Externalities, Competition, and Compatibility, 75 AM. ECON. REV. 424 (1985). Production in "network industries," e.g., airlines, electric power, and telecommunications (see, e.g., DEREGULATION OF NETWORK INDUSTRIES (Sam Peltzman & Clifford Winston eds., 2000)), involves physical networks, which also have important implications for conditions of entry, but "network effects" relate to demand rather than production.
47. A similar phenomenon arises when a product attracts more consumers by offering greater availability. An example is an ATM network, for which this effect has been documented empirically. See Garth Saloner & Andrea Shepard, Adoption of New Technologies with Network Effects: An Empirical Examination of the Adoption of Automatic Teller Machines, 26 RAND J. ECON. 479 (1995).
48. For empirical documentation of this effect, see Austan Goolsbee & Peret J. Klenow, Evidence of Learning and Network Externalities in the Diffusion of Home Computers (NBER Working Paper 7329 Sept. 1999), available at http://gsbwww.uchicago.edu/fac/ austan.goolsbee/research/computer.pdf.
49. For empirical evidence of this effect, see Neil Gandal, Hedonic Price Indexes for Spreadsheets and an Empirical Test for Network Externalities, 25 RAND J. ECON. 160 (1994).
50. This was argued to be the case for Lotus 1-2-3. See Brief Amicus Curiae of Economics Professors and Scholars in Support of Respondent, Lotus Dev. Corp.
51. See generally Neil Gandal, A Selective Survey of the Literature on Indirect Network Externalities: A Discussion of Liebowitz and Margolis, in 17 RESEARCH IN LAW AND ECONOMICS 1 (Richard O. Zerbe, Jr. & William Kovacic eds., 1995). For empirical evidence of an indirect network effect in the software industry, see Neil Gandal, Competing Compatibility Standards and Network Externalities in the PC Software Market, 77 REV. ECON. & STAT. 599 (1995).
52. See generally Neil Gandal, A Selective Survey of the Literature on Indirect Network Externalities: A Discussion of Liebowitz and Margolis, in 17 RESEARCH IN LAW AND ECONOMICS 1 (Richard O. Zerbe, Jr. & William Kovacic eds., 1995). For empirical evidence of an indirect network effect in the software industry, see Neil Gandal, Competing Compatibility Standards and Network Externalities in the PC Software Market, 77 REV. ECON. & STAT. 599 (1995).
53. For an empirical analysis of the interaction between compact discs and compact disc players, see Neil Gandal, Michael Kende & Rafael Rob, The Dynamics of Technological Adoption in Hardware/Software Systems: The Case of Compact Disc Players, 31 RAND J. ECON. 43 (2000).
54. Microsoft, IBM, and independent applications developers created sufficient applications for MS-DOS that users preferred it to the previously dominant CP/M. See Neil Gandal, Shane Greenstein & David Salant, Adoptions and Orphans in Early Microcomputer Market, 47 J. INDUS. ECON. 87 (1999).
55. For useful discussions of competition in the presence of indirect network effects, see Stanley M. Besen & Joseph Farrell, Choosing How to Compete: Strategies and Tactics in Standardization, J. ECON. PERSP., Spring 1994, at 117; Michael L. Katz & Carl Shapiro, Systems Competition and Network Effects, J. ECON. PERSP., Spring 1994, at 93.
56. For useful discussions of competition in the presence of indirect network effects, see Stanley M. Besen & Joseph Farrell, Choosing How to Compete: Strategies and Tactics in Standardization, J. ECON. PERSP., Spring 1994, at 117; Michael L. Katz & Carl Shapiro, Systems Competition and Network Effects, J. ECON. PERSP., Spring 1994, at 93.
57. See, e.g., LIEBOWITZ & MARGOLIS, supra note 5, at 120-27; W. Brian Arthur, Positive Feedback in the Economy, 262 SCIENTIFIC AM. 92 (1990), reprinted in W. BRIAN ARTHUR, INCREASING RETURNS AND PATH DEPENDENCE IN THE ECONOMY ch. 1 (1994).
58. See, e.g., LIEBOWITZ & MARGOLIS, supra note 5, at 120-27; W. Brian Arthur, Positive Feedback in the Economy, 262 SCIENTIFIC AM. 92 (1990), reprinted in W. BRIAN ARTHUR, INCREASING RETURNS AND PATH DEPENDENCE IN THE ECONOMY ch. 1 (1994).
59. See, e.g., LIEBOWITZ & MARGOLIS, supra note 5, at 120-27; W. Brian Arthur, Positive Feedback in the Economy, 262 SCIENTIFIC AM. 92 (1990), reprinted in W. BRIAN ARTHUR, INCREASING RETURNS AND PATH DEPENDENCE IN THE ECONOMY ch. 1 (1994).
60. See W. Brian Arthur, Competing Technologies, Increasing Returns, and Lock-In by Historical Events, 99 ECON. J. 116 (1989), reprinted in ARTHUR, supra note 19, ch. 2; Paul A. David, Clio and the Economics of QWERTY, 75 AM. ECON. REV. (PAPERS & PROC.) 332 (1985); Joseph Farrell & Garth Saloner, Standardization, Compatibility, and Innovation, 16 RAND J. ECON. 70 (1985).
61. See W. Brian Arthur, Competing Technologies, Increasing Returns, and Lock-In by Historical Events, 99 ECON. J. 116 (1989), reprinted in ARTHUR, supra note 19, ch. 2; Paul A. David, Clio and the Economics of QWERTY, 75 AM. ECON. REV. (PAPERS & PROC.) 332 (1985); Joseph Farrell & Garth Saloner, Standardization, Compatibility, and Innovation, 16 RAND J. ECON. 70 (1985).
62. See W. Brian Arthur, Competing Technologies, Increasing Returns, and Lock-In by Historical Events, 99 ECON. J. 116 (1989), reprinted in ARTHUR, supra note 19, ch. 2; Paul A. David, Clio and the Economics of QWERTY, 75 AM. ECON. REV. (PAPERS & PROC.) 332 (1985); Joseph Farrell & Garth Saloner, Standardization, Compatibility, and Innovation, 16 RAND J. ECON. 70 (1985).
63. See W. Brian Arthur, Competing Technologies, Increasing Returns, and Lock-In by Historical Events, 99 ECON. J. 116 (1989), reprinted in ARTHUR, supra note 19, ch. 2; Paul A. David, Clio and the Economics of QWERTY, 75 AM. ECON. REV. (PAPERS & PROC.) 332 (1985); Joseph Farrell & Garth Saloner, Standardization, Compatibility, and Innovation, 16 RAND J. ECON. 70 (1985).
64. f021 S.J. Liebowitz and Stephen E. Margolis argued in a series of articles that the evidence indicates that this has not actually occurred: Are Network Externalities a New Source of Market Failure?, in 17 RESEARCH IN LAW AND ECONOMICS 1 (Richard O. Zerbe, Jr. & William Kovacic eds., 1995); Path Dependence, Lock-In and History, 11 J.L. ECON. & ORG. 205 (1995); Network Externality: An Uncommon Tragedy, J. ECON. PERSP., Spring 1994, at 133; The Fable of the Keys, 33 J.L. & ECON. 1 (1990).
65. S.J. Liebowitz and Stephen E. Margolis argued in a series of articles that the evidence indicates that this has not actually occurred: Are Network Externalities a New Source of Market Failure?, in 17 RESEARCH IN LAW AND ECONOMICS 1 (Richard O. Zerbe, Jr. & William Kovacic eds., 1995); Path Dependence, Lock-In and History, 11 J.L. ECON. & ORG. 205 (1995); Network Externality: An Uncommon Tragedy, J. ECON. PERSP., Spring 1994, at 133; The Fable of the Keys, 33 J.L. & ECON. 1 (1990).
66. S.J. Liebowitz and Stephen E. Margolis argued in a series of articles that the evidence indicates that this has not actually occurred: Are Network Externalities a New Source of Market Failure?, in 17 RESEARCH IN LAW AND ECONOMICS 1 (Richard O. Zerbe, Jr. & William Kovacic eds., 1995); Path Dependence, Lock-In and History, 11 J.L. ECON. & ORG. 205 (1995); Network Externality: An Uncommon Tragedy, J. ECON. PERSP., Spring 1994, at 133; The Fable of the Keys, 33 J.L. & ECON. 1 (1990).
67. S.J. Liebowitz and Stephen E. Margolis argued in a series of articles that the evidence indicates that this has not actually occurred: Are Network Externalities a New Source of Market Failure?, in 17 RESEARCH IN LAW AND ECONOMICS 1 (Richard O. Zerbe, Jr. & William Kovacic eds., 1995); Path Dependence, Lock-In and History, 11 J.L. ECON. & ORG. 205 (1995); Network Externality: An Uncommon Tragedy, J. ECON. PERSP., Spring 1994, at 133; The Fable of the Keys, 33 J.L. & ECON. 1 (1990).
68. See Jeffrey Church & Neil Gandal, Complementary Network Externalities and Technology Adoption, 11 INT'L J. INDUS. ORG. 239 (1993); Michael L. Katz & Carl Shapiro, Product Introduction and Network Externalities, 40 J. INDUS. ECON. 55 (1992).
69. See Jeffrey Church & Neil Gandal, Complementary Network Externalities and Technology Adoption, 11 INT'L J. INDUS. ORG. 239 (1993); Michael L. Katz & Carl Shapiro, Product Introduction and Network Externalities, 40 J. INDUS. ECON. 55 (1992).
70. The term derives from a description of dynamic competition by economist Joseph A. Schumpeter in his most widely read work, CAPITALISM, SOCIALISM, AND DEMOCRACY ch. 7 (3d ed. 1950). Schumpeter called this competition a "Process of Creative Destruction."
71. For a similar discussion in the specific context of PC software, see David S. Evans & Richard L. Schmalensee, Be Nice to Your Rivals: How the Government Is Selling an Antitrust Case Without Consumer Harm in United States v. Microsoft, in DID MICROSOFT HARM CONSUMERS? Two OPPOSING VIEWS 45, 65-66 (David S. Evans et al., 2000), available at http:// www.aei.brookings/publications/books/consumers.pdf.
72. A collective-action problem is a type of free-rider problem commonly associated with public goods, such as national defense. Although it is in the collective interest of a group to undertake some action, e.g., defend the country from foreign attack, individual members of the group lack a sufficient incentive to act unilaterally and coordination among members of the group is difficult. See generally Mancur Olson, Collective Action, in 1 THE NEW PALGRAVE: A DICTIONARY OF ECONOMICS 474 (John Eatwell et al. eds., 1994); MANCUR OLSON, THE LOGIC OF COLLECTIVE ACTION ch. 1 (2d ed. 1971); R.H. Coase, The Problem of Social Cost, 3 J.L. & ECON. 1, 16-17 (1960). Collective-action problems are familiar in law. See, e.g., Frank I. Michelman, Property, Utility, and Fairness: Comments on the Ethical Foundations of "Just Compensation"Law, 80 HARV. L. REV. 1165, 1174-76 (1967). Collective-action problems are commonplace in antitrust. The benefits of competition derive from the fact that competitors normally cannot solve their collective-action problem and act in concert, rather than compete. In addressing collusion and monopoly, it has been argued that antitrust law is preferred to contract law because a collective-action problem prevents the victims of collusion and monopoly from contracting away such problems. See Guido Calabresi, Transaction Costs, Resource Allocation and Liability Rules - A Comment, 11 J.L. & ECON. 67, 70-71 (1968).
73. A collective-action problem is a type of free-rider problem commonly associated with public goods, such as national defense. Although it is in the collective interest of a group to undertake some action, e.g., defend the country from foreign attack, individual members of the group lack a sufficient incentive to act unilaterally and coordination among members of the group is difficult. See generally Mancur Olson, Collective Action, in 1 THE NEW PALGRAVE: A DICTIONARY OF ECONOMICS 474 (John Eatwell et al. eds., 1994); MANCUR OLSON, THE LOGIC OF COLLECTIVE ACTION ch. 1 (2d ed. 1971); R.H. Coase, The Problem of Social Cost, 3 J.L. & ECON. 1, 16-17 (1960). Collective-action problems are familiar in law. See, e.g., Frank I. Michelman, Property, Utility, and Fairness: Comments on the Ethical Foundations of "Just Compensation"Law, 80 HARV. L. REV. 1165, 1174-76 (1967). Collective-action problems are commonplace in antitrust. The benefits of competition derive from the fact that competitors normally cannot solve their collective-action problem and act in concert, rather than compete. In addressing collusion and monopoly, it has been argued that antitrust law is preferred to contract law because a collective-action problem prevents the victims of collusion and monopoly from contracting away such problems. See Guido Calabresi, Transaction Costs, Resource Allocation and Liability Rules - A Comment, 11 J.L. & ECON. 67, 70-71 (1968).
74. A collective-action problem is a type of free-rider problem commonly associated with public goods, such as national defense. Although it is in the collective interest of a group to undertake some action, e.g., defend the country from foreign attack, individual members of the group lack a sufficient incentive to act unilaterally and coordination among members of the group is difficult. See generally Mancur Olson, Collective Action, in 1 THE NEW PALGRAVE: A DICTIONARY OF ECONOMICS 474 (John Eatwell et al. eds., 1994); MANCUR OLSON, THE LOGIC OF COLLECTIVE ACTION ch. 1 (2d ed. 1971); R.H. Coase, The Problem of Social Cost, 3 J.L. & ECON. 1, 16-17 (1960). Collective-action problems are familiar in law. See, e.g., Frank I. Michelman, Property, Utility, and Fairness: Comments on the Ethical Foundations of "Just Compensation"Law, 80 HARV. L. REV. 1165, 1174-76 (1967). Collective-action problems are commonplace in antitrust. The benefits of competition derive from the fact that competitors normally cannot solve their collective-action problem and act in concert, rather than compete. In addressing collusion and monopoly, it has been argued that antitrust law is preferred to contract law because a collective-action problem prevents the victims of collusion and monopoly from contracting away such problems. See Guido Calabresi, Transaction Costs, Resource Allocation and Liability Rules - A Comment, 11 J.L. & ECON. 67, 70-71 (1968).
75. A collective-action problem is a type of free-rider problem commonly associated with public goods, such as national defense. Although it is in the collective interest of a group to undertake some action, e.g., defend the country from foreign attack, individual members of the group lack a sufficient incentive to act unilaterally and coordination among members of the group is difficult. See generally Mancur Olson, Collective Action, in 1 THE NEW PALGRAVE: A DICTIONARY OF ECONOMICS 474 (John Eatwell et al. eds., 1994); MANCUR OLSON, THE LOGIC OF COLLECTIVE ACTION ch. 1 (2d ed. 1971); R.H. Coase, The Problem of Social Cost, 3 J.L. & ECON. 1, 16-17 (1960). Collective-action problems are familiar in law. See, e.g., Frank I. Michelman, Property, Utility, and Fairness: Comments on the Ethical Foundations of "Just Compensation"Law, 80 HARV. L. REV. 1165, 1174-76 (1967). Collective-action problems are commonplace in antitrust. The benefits of competition derive from the fact that competitors normally cannot solve their collective-action problem and act in concert, rather than compete. In addressing collusion and monopoly, it has been argued that antitrust law is preferred to contract law because a collective-action problem prevents the victims of collusion and monopoly from contracting away such problems. See Guido Calabresi, Transaction Costs, Resource Allocation and Liability Rules - A Comment, 11 J.L. & ECON. 67, 70-71 (1968).
76. A collective-action problem is a type of free-rider problem commonly associated with public goods, such as national defense. Although it is in the collective interest of a group to undertake some action, e.g., defend the country from foreign attack, individual members of the group lack a sufficient incentive to act unilaterally and coordination among members of the group is difficult. See generally Mancur Olson, Collective Action, in 1 THE NEW PALGRAVE: A DICTIONARY OF ECONOMICS 474 (John Eatwell et al. eds., 1994); MANCUR OLSON, THE LOGIC OF COLLECTIVE ACTION ch. 1 (2d ed. 1971); R.H. Coase, The Problem of Social Cost, 3 J.L. & ECON. 1, 16-17 (1960). Collective-action problems are familiar in law. See, e.g., Frank I. Michelman, Property, Utility, and Fairness: Comments on the Ethical Foundations of "Just Compensation"Law, 80 HARV. L. REV. 1165, 1174-76 (1967). Collective-action problems are commonplace in antitrust. The benefits of competition derive from the fact that competitors normally cannot solve their collective-action problem and act in concert, rather than compete. In addressing collusion and monopoly, it has been argued that antitrust law is preferred to contract law because a collective-action problem prevents the victims of collusion and monopoly from contracting away such problems. See Guido Calabresi, Transaction Costs, Resource Allocation and Liability Rules - A Comment, 11 J.L. & ECON. 67, 70-71 (1968).
77. United States v. Microsoft Corp., 84 F. Supp. 2d 9, 20 (D.D.C. 1999) (Findings of Fact ¶ 39).
78. Id. at 20 (Findings of Fact ¶ 40).
79. Id. at 19-24 (Findings of Fact ¶ 36-52).
80. Id. at 18 (Findings of Fact ¶ 30).
81. Id. at 19-20 (Findings of Fact ¶ 37).
82. The conduct found to have unlawfully maintained Microsoft's operating system monopoly did so by thwarting initiatives that could have eliminated this porting problem by creating a new technological environment in which "middleware" would be the platform for applications. Middleware also exposes APIs and hence can serve as a platform, but middleware does not control the basic functions of the PC. That is done by the operating system on which the middleware runs. An application written for a middleware platform would run on every operating system on which the middleware program has been written to run. No operating system on which the middleware program was written to run would then have any advantage over any other in terms of available applications. Netscape's Navigator posed a dual threat to Microsoft's operating system monopoly because it had some potential to become a middleware platform and especially because Netscape distributed, with Navigator, Sun Microsystems' "Java runtime environment," which exposed APIs and translated programs written in the Java programming language into instructions an operating system could understand. Id. at 29-30 (Findings of Fact ¶¶ 73-77).
83. Id. at 18 (Findings of Fact ¶ 30).
84. Id.
85. Id. (Findings of Fact ¶ 31).
86. Id. (Findings of Fact ¶ 30).
87. Id. at 20 (Findings of Fact ¶ 40). Richard McKenzie, Microsoft's "Applications Barrier to Entry": The Missing 70,000 Programs, CATO POLICY ANALYSIS, No. 380, at 1, 5-8 (Aug. 31, 2000), available at http://www.cato.org/pubs/pas/pa-380.pdf, contends that the court grossly exaggerated Microsoft's advantage, because the 70,000 figure for Windows applications is far too large. But the 70,000 figure was an uncontroverted fact supplied by a Microsoft witness, and there is no doubt that far more applications run on Windows than any other PC operating system. Moreover, even a handful of applications could pose a formidable applications barrier to entry if each was: (1) produced by a separate developer, (2) critical to an entrant's success, and (3) very costly to port to an entrant's platform.
88. Evans & Schmalensee, supra note 24, at 67-68, argue that there are no important differences between these other situations and that presented by Microsoft and that there has been no exclusion of competition by the applications barrier to entry. Id. at 68-70. They contend that Apple's Mac OS and IBM's OS/2 suffered primarily from their own misjudgments, rather than the applications barrier to entry, although they do not dispute that both also suffered from a disadvantage caused by a lack of applications. They argue that developer and investor support for Linux belies the applications barrier to entry, but the absence of developer support (particularly from Microsoft) has been conspicuous, and investor support in no way implies that Linux poses a serious threat to Windows (even ignoring the possibility that investors just made a mistake).
89. The court cited only the second and third of these features. See text accompanying notes 29-30 supra; 84 F. Supp. 2d at 20-21 (Findings of Fact ¶ 41).
90. This disadvantage is mitigated by the backward compatibility of operating systems, that is, the fact that new versions are designed to run all pre-existing applications.
91. But for this fact, successful entry into PC operating systems might require no more than the commitment of resources sufficient to develop the operating system and its basic applications.
92. McKenzie, supra note 36, at 5, 9-10, argues that a few hundred applications might be all that would be needed for a new entrant to challenge Windows, but getting the necessary applications would be a daunting task due to the collective-action problem and the fact that Microsoft itself is a critical applications developer.
93. The district court found that Microsoft threatened to terminate its applications for the Mac OS at a time when Apple was particularly vulnerable in order to coerce Apple into using Microsoft's Internet Explorer browser rather than Netscape's Navigator. 84 F. Supp. 2d at 94-95 (Findings of Fact ¶¶ 343-48).
94. For other discussions on conditions of entry and the meaning of "barriers to entry," see JAMES M. FERGUSON, ADVERTISING AND COMPETITION; THEORY, MEASUREMENT, FACT 10-11 (1974); C.C. VON WEIZSÄCKER, BARRIERS TO ENTRY (1980); R.E. Caves & M.E. Porter, From Entry Barriers to Mobility Barriers: Conjectural Decisions and Contrived Deterrence to New Competition, 91 Q.J. ECON. 241 (1977); Avinash K. Dixit, A Model of Duopoly Suggesting a Theory of Entry Barriers, 10 BELL J. ECON. 20 (1979); Richard L. Schmalensee, Product Differentiation Advantages of Pioneering Brands, 72 AM. ECON. REV. 349 (1982); Richard L. Schmalensee, Economies of Scale and Barriers to Entry, 89 J. POL. ECON. 1228 (1981); C.C. von Weizsäcker, A Welfare Analysis of Barriers to Entry, 11 BELL J. ECON. 399 (1980); Michael Waterson, On the Definition and Meaning of Barriers to Entry, 26 ANTITRUST BULL. 521 (1981).
95. For other discussions on conditions of entry and the meaning of "barriers to entry," see JAMES M. FERGUSON, ADVERTISING AND COMPETITION; THEORY, MEASUREMENT, FACT 10-11 (1974); C.C. VON WEIZSÄCKER, BARRIERS TO ENTRY (1980); R.E. Caves & M.E. Porter, From Entry Barriers to Mobility Barriers: Conjectural Decisions and Contrived Deterrence to New Competition, 91 Q.J. ECON. 241 (1977); Avinash K. Dixit, A Model of Duopoly Suggesting a Theory of Entry Barriers, 10 BELL J. ECON. 20 (1979); Richard L. Schmalensee, Product Differentiation Advantages of Pioneering Brands, 72 AM. ECON. REV. 349 (1982); Richard L. Schmalensee, Economies of Scale and Barriers to Entry, 89 J. POL. ECON. 1228 (1981); C.C. von Weizsäcker, A Welfare Analysis of Barriers to Entry, 11 BELL J. ECON. 399 (1980); Michael Waterson, On the Definition and Meaning of Barriers to Entry, 26 ANTITRUST BULL. 521 (1981).
96. For other discussions on conditions of entry and the meaning of "barriers to entry," see JAMES M. FERGUSON, ADVERTISING AND COMPETITION; THEORY, MEASUREMENT, FACT 10-11 (1974); C.C. VON WEIZSÄCKER, BARRIERS TO ENTRY (1980); R.E. Caves & M.E. Porter, From Entry Barriers to Mobility Barriers: Conjectural Decisions and Contrived Deterrence to New Competition, 91 Q.J. ECON. 241 (1977); Avinash K. Dixit, A Model of Duopoly Suggesting a Theory of Entry Barriers, 10 BELL J. ECON. 20 (1979); Richard L. Schmalensee, Product Differentiation Advantages of Pioneering Brands, 72 AM. ECON. REV. 349 (1982); Richard L. Schmalensee, Economies of Scale and Barriers to Entry, 89 J. POL. ECON. 1228 (1981); C.C. von Weizsäcker, A Welfare Analysis of Barriers to Entry, 11 BELL J. ECON. 399 (1980); Michael Waterson, On the Definition and Meaning of Barriers to Entry, 26 ANTITRUST BULL. 521 (1981).
97. For other discussions on conditions of entry and the meaning of "barriers to entry," see JAMES M. FERGUSON, ADVERTISING AND COMPETITION; THEORY, MEASUREMENT, FACT 10-11 (1974); C.C. VON WEIZSÄCKER, BARRIERS TO ENTRY (1980); R.E. Caves & M.E. Porter, From Entry Barriers to Mobility Barriers: Conjectural Decisions and Contrived Deterrence to New Competition, 91 Q.J. ECON. 241 (1977); Avinash K. Dixit, A Model of Duopoly Suggesting a Theory of Entry Barriers, 10 BELL J. ECON. 20 (1979); Richard L. Schmalensee, Product Differentiation Advantages of Pioneering Brands, 72 AM. ECON. REV. 349 (1982); Richard L. Schmalensee, Economies of Scale and Barriers to Entry, 89 J. POL. ECON. 1228 (1981); C.C. von Weizsäcker, A Welfare Analysis of Barriers to Entry, 11 BELL J. ECON. 399 (1980); Michael Waterson, On the Definition and Meaning of Barriers to Entry, 26 ANTITRUST BULL. 521 (1981).
98. For other discussions on conditions of entry and the meaning of "barriers to entry," see JAMES M. FERGUSON, ADVERTISING AND COMPETITION; THEORY, MEASUREMENT, FACT 10-11 (1974); C.C. VON WEIZSÄCKER, BARRIERS TO ENTRY (1980); R.E. Caves & M.E. Porter, From Entry Barriers to Mobility Barriers: Conjectural Decisions and Contrived Deterrence to New Competition, 91 Q.J. ECON. 241 (1977); Avinash K. Dixit, A Model of Duopoly Suggesting a Theory of Entry Barriers, 10 BELL J. ECON. 20 (1979); Richard L. Schmalensee, Product Differentiation Advantages of Pioneering Brands, 72 AM. ECON. REV. 349 (1982); Richard L. Schmalensee, Economies of Scale and Barriers to Entry, 89 J. POL. ECON. 1228 (1981); C.C. von Weizsäcker, A Welfare Analysis of Barriers to Entry, 11 BELL J. ECON. 399 (1980); Michael Waterson, On the Definition and Meaning of Barriers to Entry, 26 ANTITRUST BULL. 521 (1981).
99. For other discussions on conditions of entry and the meaning of "barriers to entry," see JAMES M. FERGUSON, ADVERTISING AND COMPETITION; THEORY, MEASUREMENT, FACT 10-11 (1974); C.C. VON WEIZSÄCKER, BARRIERS TO ENTRY (1980); R.E. Caves & M.E. Porter, From Entry Barriers to Mobility Barriers: Conjectural Decisions and Contrived Deterrence to New Competition, 91 Q.J. ECON. 241 (1977); Avinash K. Dixit, A Model of Duopoly Suggesting a Theory of Entry Barriers, 10 BELL J. ECON. 20 (1979); Richard L. Schmalensee, Product Differentiation Advantages of Pioneering Brands, 72 AM. ECON. REV. 349 (1982); Richard L. Schmalensee, Economies of Scale and Barriers to Entry, 89 J. POL. ECON. 1228 (1981); C.C. von Weizsäcker, A Welfare Analysis of Barriers to Entry, 11 BELL J. ECON. 399 (1980); Michael Waterson, On the Definition and Meaning of Barriers to Entry, 26 ANTITRUST BULL. 521 (1981).
100. For other discussions on conditions of entry and the meaning of "barriers to entry," see JAMES M. FERGUSON, ADVERTISING AND COMPETITION; THEORY, MEASUREMENT, FACT 10-11 (1974); C.C. VON WEIZSÄCKER, BARRIERS TO ENTRY (1980); R.E. Caves & M.E. Porter, From Entry Barriers to Mobility Barriers: Conjectural Decisions and Contrived Deterrence to New Competition, 91 Q.J. ECON. 241 (1977); Avinash K. Dixit, A Model of Duopoly Suggesting a Theory of Entry Barriers, 10 BELL J. ECON. 20 (1979); Richard L. Schmalensee, Product Differentiation Advantages of Pioneering Brands, 72 AM. ECON. REV. 349 (1982); Richard L. Schmalensee, Economies of Scale and Barriers to Entry, 89 J. POL. ECON. 1228 (1981); C.C. von Weizsäcker, A Welfare Analysis of Barriers to Entry, 11 BELL J. ECON. 399 (1980); Michael Waterson, On the Definition and Meaning of Barriers to Entry, 26 ANTITRUST BULL. 521 (1981).
101. For other discussions on conditions of entry and the meaning of "barriers to entry," see JAMES M. FERGUSON, ADVERTISING AND COMPETITION; THEORY, MEASUREMENT, FACT 10-11 (1974); C.C. VON WEIZSÄCKER, BARRIERS TO ENTRY (1980); R.E. Caves & M.E. Porter, From Entry Barriers to Mobility Barriers: Conjectural Decisions and Contrived Deterrence to New Competition, 91 Q.J. ECON. 241 (1977); Avinash K. Dixit, A Model of Duopoly Suggesting a Theory of Entry Barriers, 10 BELL J. ECON. 20 (1979); Richard L. Schmalensee, Product Differentiation Advantages of Pioneering Brands, 72 AM. ECON. REV. 349 (1982); Richard L. Schmalensee, Economies of Scale and Barriers to Entry, 89 J. POL. ECON. 1228 (1981); C.C. von Weizsäcker, A Welfare Analysis of Barriers to Entry, 11 BELL J. ECON. 399 (1980); Michael Waterson, On the Definition and Meaning of Barriers to Entry, 26 ANTITRUST BULL. 521 (1981).
102. JOE S. BAIN, BARRIERS TO NEW COMPETITION (1956).
103. Id. at 3 (emphasis deleted).
104. See id. at 6-7, 10-11, 17.
105. See id. at 53, 114, 144 (chapter headings).
106. See id. at 114-20.
107. See id. at 144-47.
108. See id. at 53-56.
109. See id. at 145-47. Some economists have argued that capital market imperfections give incumbents a significant advantage in raising capital, so higher capital requirements make entry more difficult. See, e.g., DAVID L. KASERMAN & JOHN W. MAYO, GOVERNMENT AND BUSINESS 310-11 (1995); F.M. SCHERER, INDUSTRIAL MARKET STRUCTURE AND ECONOMIC PERFORMANCE 303-04 (2d ed. 1980). Other economists doubt that high capital requirements make entry more difficult. See, e.g., DENNIS W. CARLTON & JEFFREY M. PERLOFF, MODERN INDUSTRIAL ORGANIZATION 79 (3d ed. 1990) ("It is not necessarily true that it is more difficult to raise money for large than small projects.").
110. See id. at 145-47. Some economists have argued that capital market imperfections give incumbents a significant advantage in raising capital, so higher capital requirements make entry more difficult. See, e.g., DAVID L. KASERMAN & JOHN W. MAYO, GOVERNMENT AND BUSINESS 310-11 (1995); F.M. SCHERER, INDUSTRIAL MARKET STRUCTURE AND ECONOMIC PERFORMANCE 303-04 (2d ed. 1980). Other economists doubt that high capital requirements make entry more difficult. See, e.g., DENNIS W. CARLTON & JEFFREY M. PERLOFF, MODERN INDUSTRIAL ORGANIZATION 79 (3d ed. 1990) ("It is not necessarily true that it is more difficult to raise money for large than small projects.").
111. See id. at 145-47. Some economists have argued that capital market imperfections give incumbents a significant advantage in raising capital, so higher capital requirements make entry more difficult. See, e.g., DAVID L. KASERMAN & JOHN W. MAYO, GOVERNMENT AND BUSINESS 310-11 (1995); F.M. SCHERER, INDUSTRIAL MARKET STRUCTURE AND ECONOMIC PERFORMANCE 303-04 (2d ed. 1980). Other economists doubt that high capital requirements make entry more difficult. See, e.g., DENNIS W. CARLTON & JEFFREY M. PERLOFF, MODERN INDUSTRIAL ORGANIZATION 79 (3d ed. 1990) ("It is not necessarily true that it is more difficult to raise money for large than small projects.").
112. See id. at 145-47. Some economists have argued that capital market imperfections give incumbents a significant advantage in raising capital, so higher capital requirements make entry more difficult. See, e.g., DAVID L. KASERMAN & JOHN W. MAYO, GOVERNMENT AND BUSINESS 310-11 (1995); F.M. SCHERER, INDUSTRIAL MARKET STRUCTURE AND ECONOMIC PERFORMANCE 303-04 (2d ed. 1980). Other economists doubt that high capital requirements make entry more difficult. See, e.g., DENNIS W. CARLTON & JEFFREY M. PERLOFF, MODERN INDUSTRIAL ORGANIZATION 79 (3d ed. 1990) ("It is not necessarily true that it is more difficult to raise money for large than small projects.").
113. JOE S. BAIN, INDUSTRIAL ORGANIZATION 239 (1959). See also JOE S. BAIN, INDUSTRIAL ORGANIZATION 255 (2d ed. 1968).
114. JOE S. BAIN, INDUSTRIAL ORGANIZATION 239 (1959). See also JOE S. BAIN, INDUSTRIAL ORGANIZATION 255 (2d ed. 1968).
115. GEORGE J. STIGLER, THE ORGANIZATION OF INDUSTRY 67 (1968).
116. Id. ch. 6. Prior discussions by Stigler on conditions of entry are GEORGE J. STIGLER, THE THEORY OF PRICE 220-27 (3d ed. 1966); George J. Stigler, Monopoly and Oligopoly by Merger, 40 AM. ECON. REV. (PAPERS & PROC.) 23 (1950), reprinted in STIGLER, supra note 53, ch. 8.
117. Id. ch. 6. Prior discussions by Stigler on conditions of entry are GEORGE J. STIGLER, THE THEORY OF PRICE 220-27 (3d ed. 1966); George J. Stigler, Monopoly and Oligopoly by Merger, 40 AM. ECON. REV. (PAPERS & PROC.) 23 (1950), reprinted in STIGLER, supra note 53, ch. 8.
118. Id. ch. 6. Prior discussions by Stigler on conditions of entry are GEORGE J. STIGLER, THE THEORY OF PRICE 220-27 (3d ed. 1966); George J. Stigler, Monopoly and Oligopoly by Merger, 40 AM. ECON. REV. (PAPERS & PROC.) 23 (1950), reprinted in STIGLER, supra note 53, ch. 8.
119. STIGLER, supra note 53, at 67. In the same vein is Harold Demsetz, Barriers to Entry, 72 AM. ECON. REV. 47 (1982). Demsetz explained that cost advantages arising from scarce factors of production, such as patents and natural resources, generate "economic rents," i.e., returns to the scarce factors of production in excess of those necessary to attract them away from other uses. When these rents are properly understood as costs incurred by users of the scarce factors, the prices of products produced with them may be seen as competitive, even though large accounting profits are earned by the firms owning them. Thus, scarce factors of production do not allow pricing in excess of competitive levels, and are not "barriers to entry." Of course, the inability to gain access to scarce factors of production nevertheless may prevent entry.
120. STIGLER, supra note 53, at 67. In the same vein is Harold Demsetz, Barriers to Entry, 72 AM. ECON. REV. 47 (1982). Demsetz explained that cost advantages arising from scarce factors of production, such as patents and natural resources, generate "economic rents," i.e., returns to the scarce factors of production in excess of those necessary to attract them away from other uses. When these rents are properly understood as costs incurred by users of the scarce factors, the prices of products produced with them may be seen as competitive, even though large accounting profits are earned by the firms owning them. Thus, scarce factors of production do not allow pricing in excess of competitive levels, and are not "barriers to entry." Of course, the inability to gain access to scarce factors of production nevertheless may prevent entry.
121. STIGLER, supra note 53, at 67.
122. Id. at 70.
123. Id.
124. See F.M. SCHERER & DAVID ROSS, INDUSTRIAL MARKET STRUCTURE AND ECONOMIC PERFORMANCE 360 (3d ed. 1990); JEAN TIROLE, THE THEORY OF INDUSTRIAL ORGANIZATION 305-06 (1988); Richard J. Gilbert, Mobility Barriers and the Value of Incumbency, in 1 HANDBOOK or INDUSTRIAL ORGANIZATION 475, 480-508 (Richard Schmalensee & Robert D. Willig eds., 1989).
125. See F.M. SCHERER & DAVID ROSS, INDUSTRIAL MARKET STRUCTURE AND ECONOMIC PERFORMANCE 360 (3d ed. 1990); JEAN TIROLE, THE THEORY OF INDUSTRIAL ORGANIZATION 305-06 (1988); Richard J. Gilbert, Mobility Barriers and the Value of Incumbency, in 1 HANDBOOK or INDUSTRIAL ORGANIZATION 475, 480-508 (Richard Schmalensee & Robert D. Willig eds., 1989).
126. See F.M. SCHERER & DAVID ROSS, INDUSTRIAL MARKET STRUCTURE AND ECONOMIC PERFORMANCE 360 (3d ed. 1990); JEAN TIROLE, THE THEORY OF INDUSTRIAL ORGANIZATION 305-06 (1988); Richard J. Gilbert, Mobility Barriers and the Value of Incumbency, in 1 HANDBOOK or INDUSTRIAL ORGANIZATION 475, 480-508 (Richard Schmalensee & Robert D. Willig eds., 1989).
127. Notable examples are CARLTON & PERLOFF, supra note 51, at 79 ("a logical definition of a long-run barrier to entry is a cost that must be incurred by a new entrant that incumbents do not (or have not had to) bear"); WILLIAM J. BAUMOL, JOHN C. PANZAR & ROBERT D. WILLIG, CONTESTABLE MARKETS AND THE THEORY OF INDUSTRY STRUCTURE 282 (1982) ("an entry barrier is anything that requires an expenditure by a new entrant into an industry, but imposes no equivalent cost upon an incumbent"); FRANKLIN M. FISHER, JOHN J. MCGOWAN & JOEN E. GREENWOOD, FOLDED, SPINDLED, AND MUTILATED: ECONOMIC ANALYSIS AND U.S. v. IBM 165 (1983) ("Not all 'advantages' possessed by an incumbent result in barriers to entry. In order to be a barrier the 'advantage' must be one that cannot be reproduced by an entrant with effort or expenditure comparable to that expended by the incumbent.").
128. Notable examples are CARLTON & PERLOFF, supra note 51, at 79 ("a logical definition of a long-run barrier to entry is a cost that must be incurred by a new entrant that incumbents do not (or have not had to) bear"); WILLIAM J. BAUMOL, JOHN C. PANZAR & ROBERT D. WILLIG, CONTESTABLE MARKETS AND THE THEORY OF INDUSTRY STRUCTURE 282 (1982) ("an entry barrier is anything that requires an expenditure by a new entrant into an industry, but imposes no equivalent cost upon an incumbent"); FRANKLIN M. FISHER, JOHN J. MCGOWAN & JOEN E. GREENWOOD, FOLDED, SPINDLED, AND MUTILATED: ECONOMIC ANALYSIS AND U.S. v. IBM 165 (1983) ("Not all 'advantages' possessed by an incumbent result in barriers to entry. In order to be a barrier the 'advantage' must be one that cannot be reproduced by an entrant with effort or expenditure comparable to that expended by the incumbent.").
129. Notable examples are CARLTON & PERLOFF, supra note 51, at 79 ("a logical definition of a long-run barrier to entry is a cost that must be incurred by a new entrant that incumbents do not (or have not had to) bear"); WILLIAM J. BAUMOL, JOHN C. PANZAR & ROBERT D. WILLIG, CONTESTABLE MARKETS AND THE THEORY OF INDUSTRY STRUCTURE 282 (1982) ("an entry barrier is anything that requires an expenditure by a new entrant into an industry, but imposes no equivalent cost upon an incumbent"); FRANKLIN M. FISHER, JOHN J. MCGOWAN & JOEN E. GREENWOOD, FOLDED, SPINDLED, AND MUTILATED: ECONOMIC ANALYSIS AND U.S. v. IBM 165 (1983) ("Not all 'advantages' possessed by an incumbent result in barriers to entry. In order to be a barrier the 'advantage' must be one that cannot be reproduced by an entrant with effort or expenditure comparable to that expended by the incumbent.").
130. See, e.g., BAUMOL, PANZAR & WILLIG, supra note 60, at 290-92; William J. Baumol & Robert D. Willig, Fixed Cost, Sunk Cost, Entry Barriers and the Sustainability of Monopoly, 95 Q.J. ECON. 405 (1981); Gilbert, supra note 59.
131. See, e.g., BAUMOL, PANZAR & WILLIG, supra note 60, at 290-92; William J. Baumol & Robert D. Willig, Fixed Cost, Sunk Cost, Entry Barriers and the Sustainability of Monopoly, 95 Q.J. ECON. 405 (1981); Gilbert, supra note 59.
132. See, e.g., BAUMOL, PANZAR & WILLIG, supra note 60, at 290-92; William J. Baumol & Robert D. Willig, Fixed Cost, Sunk Cost, Entry Barriers and the Sustainability of Monopoly, 95 Q.J. ECON. 405 (1981); Gilbert, supra note 59.
133. See Gilbert, supra note 59, at 491 (with sunk costs, "entry can be deterred" even though "there is no Stiglerian barrier to entry").
134. United States v. Microsoft Corp., Direct Testimony of Richard L. Schmalensee ¶¶ 37-60, 95-133, available at http://www.neramicrosoft.com/NeraDocuments/TheTrial/ Microsoft'sCase/schmal_direct.zip; United States v. Microsoft Corp., Trial Transcript 1/21/99 am at 31-39, available at http://www.neramicrosoft.com/NeraDocuments/ TheTrial/Microsoft'sCase/schmal_oral.doc. Moreover, an amicus brief lodged with the court of appeals (but not accepted for filing for a variety of reasons) is devoted largely to arguing that the district court's findings on the applications barrier to entry "lack a proper basis in fact, economics, and law." Brief of Laura Bennett Peterson, Amicus Curiae, Urging Reversal or Vacation of the Judgment Below 5, available at http://ecfp. cadc.uscourts.gov/MS-Docs/1672/0.pdf.
135. Schmalensee Direct Testimony, supra note 63, ¶ 53.
136. Id. ¶ 115
137. Id.
138. See 84 F. Supp. 2d at 21 (Findings of Fact ¶ 43). No doubt Microsoft thinks of its efforts as preaching the gospel of Windows.
139. Incumbents may have important advantages by virtue of having entered at an earlier time when entry conditions were more favorable. See Richard L. Schmalensee, Ease of Entry: Has the Concept Been Applied Too Readily?, 56 ANTITRUST L.J. 41, 44 (1987). See also Schmalensee, Product Differentiation, supra note 43. And the district court in Microsoft found that an entrant today faces entry obstacles Microsoft did not face: The cost to a would-be entrant of inducing [developers] to write applications for its operating system exceeds the cost that Microsoft itself has faced in inducing [developers] to write applications for its operating system products, for Microsoft never confronted a highly penetrated market dominated by a single competitor. . . . [D]espite the substantial resources Microsoft expends inducing [developers] to develop applications for new versions of Windows, the company does not face any obstacles nearly as imposing as the barrier to entry that vendors and would- be vendors of other PC operating systems must overcome.
140. Incumbents may have important advantages by virtue of having entered at an earlier time when entry conditions were more favorable. See Richard L. Schmalensee, Ease of Entry: Has the Concept Been Applied Too Readily?, 56 ANTITRUST L.J. 41, 44 (1987). See also Schmalensee, Product Differentiation, supra note 43. And the district court in Microsoft found that an entrant today faces entry obstacles Microsoft did not face: The cost to a would-be entrant of inducing [developers] to write applications for its operating system exceeds the cost that Microsoft itself has faced in inducing [developers] to write applications for its operating system products, for Microsoft never confronted a highly penetrated market dominated by a single competitor. . . . [D]espite the substantial resources Microsoft expends inducing [developers] to develop applications for new versions of Windows, the company does not face any obstacles nearly as imposing as the barrier to entry that vendors and would-be vendors of other PC operating systems must overcome.
141. 84 F. Supp. 2d at 21-22 (Findings of Fact ¶¶ 43-44).
142. See supra note 55 and accompanying text (emphasis added).
143. Most of Stigler's followers take this view. See, e.g., CARLTON & PERLOFF, supra note 51, at 77 (a barrier to entry "is a cost that must be incurred by a new entrant that incumbents do not (or have not had to) bear"); RICHARD A. POSNER & FRANK H. EASTERBROOK, ANTITRUST 513 (2d ed. 1981) (a barrier to entry is "a cost that a new entrant must bear but existing firms never bore"). But see JOHN S. MCGEE, INDUSTRIAL ORGANIZATION 155 (1988) (only "current replacement and opportunity costs are relevant" "for locating monopoly").
144. Most of Stigler's followers take this view. See, e.g., CARLTON & PERLOFF, supra note 51, at 77 (a barrier to entry "is a cost that must be incurred by a new entrant that incumbents do not (or have not had to) bear"); RICHARD A. POSNER & FRANK H. EASTERBROOK, ANTITRUST 513 (2d ed. 1981) (a barrier to entry is "a cost that a new entrant must bear but existing firms never bore"). But see JOHN S. MCGEE, INDUSTRIAL ORGANIZATION 155 (1988) (only "current replacement and opportunity costs are relevant" "for locating monopoly").
145. Most of Stigler's followers take this view. See, e.g., CARLTON & PERLOFF, supra note 51, at 77 (a barrier to entry "is a cost that must be incurred by a new entrant that incumbents do not (or have not had to) bear"); RICHARD A. POSNER & FRANK H. EASTERBROOK, ANTITRUST 513 (2d ed. 1981) (a barrier to entry is "a cost that a new entrant must bear but existing firms never bore"). But see JOHN S. MCGEE, INDUSTRIAL ORGANIZATION 155 (1988) (only "current replacement and opportunity costs are relevant" "for locating monopoly").
146. Supporting an entrant may be attractive because, if the entrant thrives, there may be a significant payoff from being an early supporter. This possibility was considered in Microsoft. See 84 F. Supp. 2d at 21 (Findings of Fact ¶ 42). But in that case the dominant incumbent has an absolute cost advantage because it is less costly to port from an old version of Windows to a new version of Windows than it is to port from any version of Windows to an entirely different operating system.
147. See Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 226 (1993) (when "new entry is easy" "summary disposition" "is appropriate" in a predation case); Cargill, Inc. v. Monfort of Colo., Inc., 479 U.S. 104, 119-20 n.15 (1986) ("without barriers to entry into the market it would presumably be impossible to maintain supracompetitive prices for an extended time"); Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 591 n.15 (1986) (same).
148. See Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 226 (1993) (when "new entry is easy" "summary disposition" "is appropriate" in a predation case); Cargill, Inc. v. Monfort of Colo., Inc., 479 U.S. 104, 119-20 n.15 (1986) ("without barriers to entry into the market it would presumably be impossible to maintain supracompetitive prices for an extended time"); Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 591 n.15 (1986) (same).
149. See Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 226 (1993) (when "new entry is easy" "summary disposition" "is appropriate" in a predation case); Cargill, Inc. v. Monfort of Colo., Inc., 479 U.S. 104, 119-20 n.15 (1986) ("without barriers to entry into the market it would presumably be impossible to maintain supracompetitive prices for an extended time"); Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 591 n.15 (1986) (same).
150. Jefferson Parish Hosp. Dist. No. 2 v. Hyde, 466 U.S. 2, 29 n.48 (1984).
151. Eastman Kodak Co. v. Image Technical Servs., Inc., 504 U.S. 451, 485 (1992). See also Hyde, 466 U.S. at 13 n. 19, 14 (tying creates a "barrier to entry" by making entry "significantly more expensive"); Fortner Enters, v. United States Steel Corp., 394 U.S. 495, 509 (1969) (tying houses to credit raises "barriers to entry" because an entrant would need "sufficient financial strength to offer credit comparable to that provided by the large companies under the tying arrangements").
152. Eastman Kodak Co. v. Image Technical Servs., Inc., 504 U.S. 451, 485 (1992). See also Hyde, 466 U.S. at 13 n. 19, 14 (tying creates a "barrier to entry" by making entry "significantly more expensive"); Fortner Enters, v. United States Steel Corp., 394 U.S. 495, 509 (1969) (tying houses to credit raises "barriers to entry" because an entrant would need "sufficient financial strength to offer credit comparable to that provided by the large companies under the tying arrangements").
153. Eastman Kodak Co. v. Image Technical Servs., Inc., 504 U.S. 451, 485 (1992). See also Hyde, 466 U.S. at 13 n. 19, 14 (tying creates a "barrier to entry" by making entry "significantly more expensive"); Fortner Enters, v. United States Steel Corp., 394 U.S. 495, 509 (1969) (tying houses to credit raises "barriers to entry" because an entrant would need "sufficient financial strength to offer credit comparable to that provided by the large companies under the tying arrangements").
154. The Court indicated that the barriers to entry from both tying and exclusive contracts stemmed from increases in the capital requirements for entry, and the Eighth Circuit recently held that a "significant barrier to entry may exist when large amounts of capital would be required." Concord Boat Corp. v. Brunswick Corp., 207 F.3d 1039, 1059 (8th Cir. 2000). There is no suggestion by the Court of any asymmetry in the capital requirements of entrants and incumbents, and Stigler specifically argued that high capital requirements for both were not a barrier to entry. See supra note 58 and accompanying text. In more modern economic terms, tying and exclusive dealing could be said to raise barriers to entry if they increase the sunk costs associated with entry, which also is inconsistent with Stigler's definition. See supra notes 61-62 and accompanying text. Tying also creates a barrier to entry in the tying product market if there otherwise were significant barriers to entry in only the tied-product market. On the other hand, exclusive contracts can facilitate entry by providing contractual assurances of future sales which recover some of the sunk costs associated with entry.
155. See United States v. Citizens & S. Nat'l Bank, 422 U.S. 86, 118 n.30 (1975) ("The banking business is riddled with state and federal regulatory barriers to entry."); United States v. Marine Bancorporation, 418 U.S. 602, 629 (1974) (noting "regulatory barriers to entry into commercial banking"); see also Hoover v. Ronwin, 466 U.S. 558, 597 (1984) (Stevens, J., dissenting) (a bar exam constitutes "a significant barrier to entry into the profession").
156. See United States v. Citizens & S. Nat'l Bank, 422 U.S. 86, 118 n.30 (1975) ("The banking business is riddled with state and federal regulatory barriers to entry."); United States v. Marine Bancorporation, 418 U.S. 602, 629 (1974) (noting "regulatory barriers to entry into commercial banking"); see also Hoover v. Ronwin, 466 U.S. 558, 597 (1984) (Stevens, J., dissenting) (a bar exam constitutes "a significant barrier to entry into the profession").
157. See United States v. Citizens & S. Nat'l Bank, 422 U.S. 86, 118 n.30 (1975) ("The banking business is riddled with state and federal regulatory barriers to entry."); United States v. Marine Bancorporation, 418 U.S. 602, 629 (1974) (noting "regulatory barriers to entry into commercial banking"); see also Hoover v. Ronwin, 466 U.S. 558, 597 (1984) (Stevens, J., dissenting) (a bar exam constitutes "a significant barrier to entry into the profession").
158. This view is espoused by YALE BROZEN, Is GOVERNMENT THE SOURCE OF MONOPOLY? AND OTHER ESSAYS 1-22 (1980); Daniel Oliver, Luncheon Address, 55 ANTITRUST L.J. 349, 350 (1986) ("the principal source of restraints on competition is government"). This view is attributed to others by INGO L.O. SCHMIDT & JAN B. RITTALER, A CRITICAL EVALUATION OF THE CHICAGO SCHOOL OF ANTITRUST ANALYSIS 74 (1989) ("there are, according to the Chicago School, no relevant or important barriers to entry except legal barriers").
159. This view is espoused by YALE BROZEN, Is GOVERNMENT THE SOURCE OF MONOPOLY? AND OTHER ESSAYS 1-22 (1980); Daniel Oliver, Luncheon Address, 55 ANTITRUST L.J. 349, 350 (1986) ("the principal source of restraints on competition is government"). This view is attributed to others by INGO L.O. SCHMIDT & JAN B. RITTALER, A CRITICAL EVALUATION OF THE CHICAGO SCHOOL OF ANTITRUST ANALYSIS 74 (1989) ("there are, according to the Chicago School, no relevant or important barriers to entry except legal barriers").
160. This view is espoused by YALE BROZEN, Is GOVERNMENT THE SOURCE OF MONOPOLY? AND OTHER ESSAYS 1-22 (1980); Daniel Oliver, Luncheon Address, 55 ANTITRUST L.J. 349, 350 (1986) ("the principal source of restraints on competition is government"). This view is attributed to others by INGO L.O. SCHMIDT & JAN B. RITTALER, A CRITICAL EVALUATION OF THE CHICAGO SCHOOL OF ANTITRUST ANALYSIS 74 (1989) ("there are, according to the Chicago School, no relevant or important barriers to entry except legal barriers").
161. Reazin v. Blue Cross & Blue Shield of Kan., Inc., 899 F.2d 951, 968 (10th Cir. 1990).
162. Colo. Interstate Gas Co. v. Natural Gas Pipeline of Am., 885 F.2d 683, 696 n.21 (10th Cir. 1989).
163. 105 F.T.C. 410 (1985). Dissenting Commissioner Patricia Bailey colorfully described the majority's analysis as the "'Chicago School' economic 'State Religion' approach to barriers to entry." Id. at 495.
164. Id. at 485.
165. Id. at 486. The entry analysis in Echlin was followed by many FTC decisions. E.g., B.F. Goodrich Co., 110 F.T.C. 207, 297 (1988) ("Impediments to entry that do not rise to the level of absolute barriers to entry may nevertheless permit the exercise of market power for substantial periods of time."). In recent years, the Commission may have changed its entry analysis, but only very slightly. Cf. Coca-Cola Bottling Co. of the Southwest, 118 F.T.C. 452, 617-18 (1994) ("Entry barriers include any condition that necessarily delays entry into a market for a significant period of time and thus allows market power to be exercised in the interim. We have pointed out that barriers or impediments need not be absolute; rather, they are assessed in terms of the amount of time required for a motivated outsider to effect entry.") (internal quotations and citations omitted).
166. Id. at 486. The entry analysis in Echlin was followed by many FTC decisions. E.g., B.F. Goodrich Co., 110 F.T.C. 207, 297 (1988) ("Impediments to entry that do not rise to the level of absolute barriers to entry may nevertheless permit the exercise of market power for substantial periods of time."). In recent years, the Commission may have changed its entry analysis, but only very slightly. Cf. Coca-Cola Bottling Co. of the Southwest, 118 F.T.C. 452, 617-18 (1994) ("Entry barriers include any condition that necessarily delays entry into a market for a significant period of time and thus allows market power to be exercised in the interim. We have pointed out that barriers or impediments need not be absolute; rather, they are assessed in terms of the amount of time required for a motivated outsider to effect entry.") (internal quotations and citations omitted).
167. Id. at 486. The entry analysis in Echlin was followed by many FTC decisions. E.g., B.F. Goodrich Co., 110 F.T.C. 207, 297 (1988) ("Impediments to entry that do not rise to the level of absolute barriers to entry may nevertheless permit the exercise of market power for substantial periods of time."). In recent years, the Commission may have changed its entry analysis, but only very slightly. Cf. Coca-Cola Bottling Co. of the Southwest, 118 F.T.C. 452, 617-18 (1994) ("Entry barriers include any condition that necessarily delays entry into a market for a significant period of time and thus allows market power to be exercised in the interim. We have pointed out that barriers or impediments need not be absolute; rather, they are assessed in terms of the amount of time required for a motivated outsider to effect entry.") (internal quotations and citations omitted).
168. Ball Mem'l Hosp., Inc. v. Mutual Hosp. Ins., Inc., 784 F.2d 1325, 1335 (7th Cir. 1986) ("There are no barriers to entry - other firms may duplicate the Blues' product at the same cost the Blues incur in furnishing their coverage. See George J. Stigler, The Organization of Industry 67-70 (1968) (defining barriers to entry as differentials in the long-term costs of production); cf. Harold Demsetz, Barriers to Entry, 72 AM. ECON. REV. 47 (1982) (showing that not all barriers, as so defined, injure effective competition)"); Will v. Comprehensive Accounting Corp., 776 F.2d 665, 673 (7th Cir. 1985) ("Plaintiffs did not show or try to show that Comprehensive has a cost advantage over rivals and potential rivals, that there is a barrier to entry into the business of franchising. They did not show or try to show that rivals could not produce a similar package for a similar cost; without such a showing, they must lose.").
169. Ball Mem'l Hosp., Inc. v. Mutual Hosp. Ins., Inc., 784 F.2d 1325, 1335 (7th Cir. 1986) ("There are no barriers to entry - other firms may duplicate the Blues' product at the same cost the Blues incur in furnishing their coverage. See George J. Stigler, The Organization of Industry 67-70 (1968) (defining barriers to entry as differentials in the long-term costs of production); cf. Harold Demsetz, Barriers to Entry, 72 AM. ECON. REV. 47 (1982) (showing that not all barriers, as so defined, injure effective competition)"); Will v. Comprehensive Accounting Corp., 776 F.2d 665, 673 (7th Cir. 1985) ("Plaintiffs did not show or try to show that Comprehensive has a cost advantage over rivals and potential rivals, that there is a barrier to entry into the business of franchising. They did not show or try to show that rivals could not produce a similar package for a similar cost; without such a showing, they must lose.").
170. Ball Mem'l Hosp., Inc. v. Mutual Hosp. Ins., Inc., 784 F.2d 1325, 1335 (7th Cir. 1986) ("There are no barriers to entry - other firms may duplicate the Blues' product at the same cost the Blues incur in furnishing their coverage. See George J. Stigler, The Organization of Industry 67-70 (1968) (defining barriers to entry as differentials in the long-term costs of production); cf. Harold Demsetz, Barriers to Entry, 72 AM. ECON. REV. 47 (1982) (showing that not all barriers, as so defined, injure effective competition)"); Will v. Comprehensive Accounting Corp., 776 F.2d 665, 673 (7th Cir. 1985) ("Plaintiffs did not show or try to show that Comprehensive has a cost advantage over rivals and potential rivals, that there is a barrier to entry into the business of franchising. They did not show or try to show that rivals could not produce a similar package for a similar cost; without such a showing, they must lose.").
171. Ball Mem'l Hosp., Inc. v. Mutual Hosp. Ins., Inc., 784 F.2d 1325, 1335 (7th Cir. 1986) ("There are no barriers to entry - other firms may duplicate the Blues' product at the same cost the Blues incur in furnishing their coverage. See George J. Stigler, The Organization of Industry 67-70 (1968) (defining barriers to entry as differentials in the long-term costs of production); cf. Harold Demsetz, Barriers to Entry, 72 AM. ECON. REV. 47 (1982) (showing that not all barriers, as so defined, injure effective competition)"); Will v. Comprehensive Accounting Corp., 776 F.2d 665, 673 (7th Cir. 1985) ("Plaintiffs did not show or try to show that Comprehensive has a cost advantage over rivals and potential rivals, that there is a barrier to entry into the business of franchising. They did not show or try to show that rivals could not produce a similar package for a similar cost; without such a showing, they must lose.").
172. See FTC v. Elders Grain, Inc., 868 F.2d 901, 905 (1989) ("And since entry into the industry is slow - it takes three to nine years to design, build, and start operating a new mill - colluding sellers need not fear that any
173. See FTC v. Elders Grain, Inc., 868 F.2d 901, 905 (1989) ("And since entry into the industry is slow - it takes three to nine years to design, build, and start operating a new mill - colluding sellers need not fear that any attempt to restrict output in order to drive up price will be promptly nullified by new production."). In his prior academic career, Posner advocated Stigler's definition of barriers to entry but also argued that of "greater importance [than barriers to entry] are factors that do not create a barrier to entry but increase the length of time required for new entry to take place." RICHARD A. POSNER, ANTITRUST LAW 59 (1976).
174. Burlington N. R.R. Co. v. Surface Transp. Bd., 114 F.3d 206, 214 (D.C. Cir. 1997) (affirming an agency cost (not monopoly power) determination for rate-making purposes based in part on the agency's definition of "barriers to entry as those 'costs that a new entrant must incur that were not incurred by the incumbent'").
175. S. Pac. Communications Co. v. AT&T, 740 F.2d 980, 1001 (D.C. Cir. 1984). This definition's focus on how potential entry affects pricing by incumbents is very much in the tradition of Bain. See supra text accompanying note 45.
176. Los Angeles Land Co. v. Brunswick Corp., 6 F.3d 1422, 1427-28 & n.4 (9th Cir. 1993).
177. Accord W. Parcel Express v. UPS, 190 F.3d 974, 975 (9th Cir. 1999);
178. Image Technical Servs., Inc. v. Eastman Kodak Co., 125 F.3d 1195, 1208 (9th Cir. 1997);
179. Am. Prof 1 Testing Serv., Inc. v. Harcourt Brace Jovanovich Legal & Prof'l Pubs., Inc., 108 F.3d 1147, 1154 (9th Cir. 1997);
180. Rebel Oil Co. v. Atl. Richfield Co., 51 F.3d 1421, 1439 (9th Cir. 1995).
181. 6 F.3d at 1428. The court's quotation of the Areeda-Turner treatise was highly selective. The sentence immediately following the material quoted reads: "But that will often be the case." 2 PHILLIP AREEDA & DONALD F. TURNER, ANTITRUST LAW ¶ 409e, at 303 (1978). The treatise continues by elaborating the point at some length. To be fair to the court, however, the 1978 Areeda-Turner volume that it quoted did have a rather Stiglerian tone, although the 1995 revised volume takes a very different approach.
182. 6 F.3d at 1428. The court's quotation of the Areeda-Turner treatise was highly selective. The sentence immediately following the material quoted reads: "But that will often be the case." 2 PHILLIP AREEDA & DONALD F. TURNER, ANTITRUST LAW ¶ 409e, at 303 (1978). The treatise continues by elaborating the point at some length. To be fair to the court, however, the 1978 Areeda-Turner volume that it quoted did have a rather Stiglerian tone, although the 1995 revised volume takes a very different approach.
183. 6 F.3d at 1428.
184. For example, Microsoft relied on Los Angeles Land in arguing that the applications barrier to entry is not a legally cognizable "barrier to entry." Its proposed conclusions of law argued An entry barrier is . . . generally understood as a disadvantage that new entrants face but incumbents do not. The need to persuade software developers to write applications for a platform like Windows is not such an entry barrier; it is instead a fundamental element of competition in the platform business encountered by every platform vendor. United States v. Microsoft Corp., Defendant Microsoft Corporation's Proposed Conclusions of Law 51-52 (Jan. 18, 2000) (citations omitted). And its brief on appeal argued that The need to generate consumer demand for a platform by persuading [developers] to write applications . . . is not a cost disproportionately borne by new entrants. Rather, it is a fundamental element of competition in the platform business, something that every developer of a successful platform has to do. In fact, Microsoft continues to invest hundreds of millions of dollars "each year inducing ISVs to write applications for Windows." Each time Microsoft releases a new version of Windows, "Microsoft must convince ISVs to write applications that take advantage of new APIs, so that existing Windows users will have [an] incentive to buy an upgrade." Microsoft thus spends "more on platform 'evangelization,' even in relative terms, than any other PC operating-system vendor." United States v. Microsoft Corp., Brief for Defendant-Appellant 93-95 (citations omitted) (quoting the district court's findings of fact), available at http://ecfp.cadc.uscourts.gov/ MS-Docs/1696/0.pdf.
185. See, e.g., CARLTON & PERLOFF, supra note 51, at 79. Adherents of the Chicago School espouse this view. See BORK, supra note 1, at 195-96, 322-23; MCGEE, supra note 70, at 155; POSNER & EASTERBROOK, supra note 70, at 513; Richard A. Posner, The Chicago School of Antitrust Analysis, 127 U. PA. L. REV. 925, 929 (1979).
186. See, e.g., CARLTON & PERLOFF, supra note 51, at 79. Adherents of the Chicago School espouse this view. See BORK, supra note 1, at 195-96, 322-23; MCGEE, supra note 70, at 155; POSNER & EASTERBROOK, supra note 70, at 513; Richard A. Posner, The Chicago School of Antitrust Analysis, 127 U. PA. L. REV. 925, 929 (1979).
187. See, e.g., CARLTON & PERLOFF, supra note 51, at 79. Adherents of the Chicago School espouse this view. See BORK, supra note 1, at 195-96, 322-23; MCGEE, supra note 70, at 155; POSNER & EASTERBROOK, supra note 70, at 513; Richard A. Posner, The Chicago School of Antitrust Analysis, 127 U. PA. L. REV. 925, 929 (1979).
188. See, e.g., CARLTON & PERLOFF, supra note 51, at 79. Adherents of the Chicago School espouse this view. See BORK, supra note 1, at 195-96, 322-23; MCGEE, supra note 70, at 155; POSNER & EASTERBROOK, supra note 70, at 513; Richard A. Posner, The Chicago School of Antitrust Analysis, 127 U. PA. L. REV. 925, 929 (1979).
189. See, e.g., CARLTON & PERLOFF, supra note 51, at 79. Adherents of the Chicago School espouse this view. See BORK, supra note 1, at 195-96, 322-23; MCGEE, supra note 70, at 155; POSNER & EASTERBROOK, supra note 70, at 513; Richard A. Posner, The Chicago School of Antitrust Analysis, 127 U. PA. L. REV. 925, 929 (1979).
190. Advo, Inc. v. Philadelphia Newspapers, Inc., 51 F.3d 1191, 1201-02 (3d Cir. 1995). See also Stearns Airport Equip. Co. v. FMC Corp., 170 F.3d 518, 530 (5th Cir. 1999) (quoting Advo). The Supreme Court precedent referred to is Brooke Group's endorsement of summary judgment when "entry is easy." See supra note 72.
191. Advo, Inc. v. Philadelphia Newspapers, Inc., 51 F.3d 1191, 1201-02 (3d Cir. 1995). See also Stearns Airport Equip. Co. v. FMC Corp., 170 F.3d 518, 530 (5th Cir. 1999) (quoting Advo). The Supreme Court precedent referred to is Brooke Group's endorsement of summary judgment when "entry is easy." See supra note 72.
192. Omega Envtl., Inc. v. Gilbarco, Inc., 127 F.3d 1157, 1164 (9th Cir. 1997). See also Am. Prof'l Testing, 108 F.3d at 1154 ("reputation alone does not constitute a sufficient entry barrier in this Circuit"); United States v. Syufy Enters., 903 F.2d 659, 669 (9th Cir. 1990) ("We fail to see how the existence of good will achieved through effective service is an impediment to, rather than the natural result of, competition.").
193. Omega Envtl., Inc. v. Gilbarco, Inc., 127 F.3d 1157, 1164 (9th Cir. 1997). See also Am. Prof'l Testing, 108 F.3d at 1154 ("reputation alone does not constitute a sufficient entry barrier in this Circuit"); United States v. Syufy Enters., 903 F.2d 659, 669 (9th Cir. 1990) ("We fail to see how the existence of good will achieved through effective service is an impediment to, rather than the natural result of, competition.").
194. Omega Envtl., Inc. v. Gilbarco, Inc., 127 F.3d 1157, 1164 (9th Cir. 1997). See also Am. Prof'l Testing, 108 F.3d at 1154 ("reputation alone does not constitute a sufficient entry barrier in this Circuit"); United States v. Syufy Enters., 903 F.2d 659, 669 (9th Cir. 1990) ("We fail to see how the existence of good will achieved through effective service is an impediment to, rather than the natural result of, competition.").
195. See supra text accompanying note 87.
196. Am. Prof'l Testing, 108 F.3d at 1154.
197. See supra note 25 and accompanying text.
198. See supra note 3.
199. The liability theory in Microsoft makes the applications barrier to entry particularly attractive as a logical matter. The court found that Microsoft unlawfully maintained its monopoly by unreasonably blocking products and technologies that threatened substantially to weaken the network effects. See supra notes 7, 31, and accompanying text.
200. Stigler, supra note 54. Elsewhere, Stigler noted: "No really profitable monopoly or oligopoly has ever lasted a mere 100 years," and argued that "entry is basically a question of rate." STIGLER, supra note 54, at 227.
201. Stigler, supra note 54. Elsewhere, Stigler noted: "No really profitable monopoly or oligopoly has ever lasted a mere 100 years," and argued that "entry is basically a question of rate." STIGLER, supra note 54, at 227.
202. See supra text accompanying notes 80-82. The FTC did not invent this terminology, and one encounters it on occasion, but it has not gained widespread usage in economics.
203. See supra notes 83-84 and accompanying text.
204. E.g., Am. Prof'l Testing, 108 F.3d at 1154 ("neither monopoly power nor a dangerous probability of achieving monopoly power can exist absent evidence of barriers to new entry or expansion"); United States v. Baker Hughes Inc., 908 F.2d 981, 987 (D.C. Cir. 1990) ("In the absence of significant barriers [to entry], a company probably cannot maintain supracompetitive pricing for any length of time."); United States v. Syufy Enters., 903 F.2d 659, 664 (9th Cir. 1990) ("If there are no significant barriers to entry ... any attempt to raise prices above the competitive level will lure into the market new competitors able and willing to offer their commercial goods and personal services for less."); Will v. Comprehensive Accounting Corp., 776 F.2d 665, 672 n.3 (7th Cir. 1985) ("Unless barriers to entry prevent rivals from entering the market at the same cost of production, even a very large market share does not establish market power.").
205. E.g., Am. Prof'l Testing, 108 F.3d at 1154 ("neither monopoly power nor a dangerous probability of achieving monopoly power can exist absent evidence of barriers to new entry or expansion"); United States v. Baker Hughes Inc., 908 F.2d 981, 987 (D.C. Cir. 1990) ("In the absence of significant barriers [to entry], a company probably cannot maintain supracompetitive pricing for any length of time."); United States v. Syufy Enters., 903 F.2d 659, 664 (9th Cir. 1990) ("If there are no significant barriers to entry ... any attempt to raise prices above the competitive level will lure into the market new competitors able and willing to offer their commercial goods and personal services for less."); Will v. Comprehensive Accounting Corp., 776 F.2d 665, 672 n.3 (7th Cir. 1985) ("Unless barriers to entry prevent rivals from entering the market at the same cost of production, even a very large market share does not establish market power.").
206. E.g., Am. Prof'l Testing, 108 F.3d at 1154 ("neither monopoly power nor a dangerous probability of achieving monopoly power can exist absent evidence of barriers to new entry or expansion"); United States v. Baker Hughes Inc., 908 F.2d 981, 987 (D.C. Cir. 1990) ("In the absence of significant barriers [to entry], a company probably cannot maintain supracompetitive pricing for any length of time."); United States v. Syufy Enters., 903 F.2d 659, 664 (9th Cir. 1990) ("If there are no significant barriers to entry ... any attempt to raise prices above the competitive level will lure into the market new competitors able and willing to offer their commercial goods and personal services for less."); Will v. Comprehensive Accounting Corp., 776 F.2d 665, 672 n.3 (7th Cir. 1985) ("Unless barriers to entry prevent rivals from entering the market at the same cost of production, even a very large market share does not establish market power.").
207. E.g., Am. Prof'l Testing, 108 F.3d at 1154 ("neither monopoly power nor a dangerous probability of achieving monopoly power can exist absent evidence of barriers to new entry or expansion"); United States v. Baker Hughes Inc., 908 F.2d 981, 987 (D.C. Cir. 1990) ("In the absence of significant barriers [to entry], a company probably cannot maintain supracompetitive pricing for any length of time."); United States v. Syufy Enters., 903 F.2d 659, 664 (9th Cir. 1990) ("If there are no significant barriers to entry ... any attempt to raise prices above the competitive level will lure into the market new competitors able and willing to offer their commercial goods and personal services for less."); Will v. Comprehensive Accounting Corp., 776 F.2d 665, 672 n.3 (7th Cir. 1985) ("Unless barriers to entry prevent rivals from entering the market at the same cost of production, even a very large market share does not establish market power.").
208. Cargill, Inc. v. Monfort of Colo., Inc., 479 U.S. 104, 119-20 n.15 (1986)); Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 591 n.15 (1986).
209. Cargill, Inc. v. Monfort of Colo., Inc., 479 U.S. 104, 119-20 n.15 (1986)); Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 591 n.15 (1986).
210. Id. ¶ 420a, at 55-56.
211. A TRACT ON MONETARY REFORM ch. 3 (1923).
212. AREEDA ET AL., supra note 3, ¶ 420c, at 61. Professor Areeda's argument also applies to Demsetz's view that scarce factors of production are not "barriers to entry" (see supra note 55). Cases frequently, and properly, mention scarce resources as a possible source of "barriers to entry." See supra note 87 and accompanying test; Bloomkest Fertilizer, Inc. v. Potash Corp. of Saskatchewan, Inc., 203 F.3d 1028, 1039 (8th Cir. 2000) (dissenting opinion) (the need for a potash mine is a "significant entry barrier").
213. AREEDA ET AL., supra note 3, ¶ 420c, at 61. Professor Areeda's argument also applies to Demsetz's view that scarce factors of production are not "barriers to entry" (see supra note 55). Cases frequently, and properly, mention scarce resources as a possible source of "barriers to entry." See supra note 87 and accompanying test; Bloomkest Fertilizer, Inc. v. Potash Corp. of Saskatchewan, Inc., 203 F.3d 1028, 1039 (8th Cir. 2000) (dissenting opinion) (the need for a potash mine is a "significant entry barrier").
214. Without using the term "network effects," the court of appeals in a prior Microsoft case appeared to endorse the scenario that creates the applications barrier to entry by quoting the government's expert economist's articulation of it. United States v. Microsoft Corp., 56 F.3d 1448, 1452 (B.C. Cir. 1995) (Tunney Act case). In the extraordinary lengthy oral argument of the current appeal, the court raised no questions about the applications barrier to entry, and at least several judges suggested that they view PC operating systems as a winner-take-all market.
215. Thus, it is doubtful that the district court in Microsoft "fashioned a totally new entry barrier that has never before been used in antitrust cases." McKenzie, supra note 36, at 2.
216. See supra notes 74-75 and accompanying text.
217. There are also potentially serious contracting problems, since the entrant cannot directly measure either the costs incurred by complementers or the profits they earn from the underwritten activities.