Although computers have benefited society in many ways, there are some adverse effects on society. Computer users have become more dependent upon computers for calculating and answering seemingly easy questions and problems that could be answered without the assistance of a computer. Addition and subtraction are no longer figured out by hand, or “in the head”, but with the use of a calculator. Likewise, communication is now less personal. Instead of visiting a friend, or calling a person on the phone, society sees e-mail and instant messaging as a “more convenient” way of communicating. Everyday, people are spending more and more time in front of a computer monitor, as opposed to personally interacting with others and the surrounding outside environment.

One of the problems with the computer market structure is the high barrier to entry in this industry. Because price is interdependent, when one firm changes price, it will lead another firm to change price. However, the barrier to entry is lower if one firm sets a high price in the market. For example, if Firm A sets a high price for its monitors to maximize profit, then it allows room for other firms to enter the market selling their monitors at a lower price, thereby taking some of the market share away from Firm A. This will, in turn, cause Firm A to decrease its prices in order to compete with the new firms. This behavior is described by the Bertrand Model, which states that under the presumption of a duopoly, a company decides which prices to set for its products in order to capture all market demand. In general, the company will set price just below that of its competitor in order to gain market demand. However, in Bertrand competition, the optimal price is equal to marginal cost.

Microsoft, like IBM, used a strategy of pre-announcing its products. With the announcement of a competitor’s superior software, Microsoft announced that it had a new version on the way. Of course, in reality, the introduction of this new software was far from being complete. Not surprisingly however, this strategy worked. Not only did it deter consumers from buying the competitor’s product, but upon the release of Microsoft’s new software, Microsoft dramatically increased it share of DOS-based operating systems, while the competitor’s share decreased. This strategy does not work by today’s industry conduct. Whereas Microsoft is still the recognized leader in software, consumers are not motivated to purchase new versions of software when the old software is seen as still being sufficient . As a matter of fact, many consumers believe that Microsoft’s creation of new versions is a tactic that creates new revenue for the company. This happens as a result of the company making it such that documents created on new machines cannot be used on old ones. This forces a company or consumer to update its software.

According to Adams and Brock, a market is:

Another strategy used by the monopolistic-like Microsoft involves its bundling of products. Due to the fact that Microsoft typically competes with firms that specialize and make only one major product, it decided to bundle several different types of software into one application suite. Microsoft charged a lower price for those who purchased the suite, as oppose to those who bought each type of software separately. This strategy took away the incentive for consumers to buy a competitor’s product, for it would be cheaper to buy the bundled Microsoft suite that already contained many of the needed applications. This strategy worked well for a while. The weakness of the strategy was found when anti-trust charges were brought against Microsoft for bundling Internet Explorer (an internet browser) with Windows (an operating system). Microsoft was found to be guilty of illegally monopolizing trade and oppressing the competitive process by which the computer industry stimulates innovation and benefit

Some topics in this essay:
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