If the computer industry has become a virtual monopoly with one powerhouse, like Microsoft, smaller entrepreneurial firms cannot gain a market share and in most cases will either be bought out by Microsoft or deal with contracts that are both long and tedious, keeping them bonded to Microsoft and its licensing agreement
Resultantly, monopolies often face tough antitrust regulations. .
Another problem with an oligopoly market structure in the computer industry revolves around the price of products being interdependent upon firms. This means that price wars are inevitable when one company lowers its price on a particular product. To compete, the other competing firms selling a similar product will then lower their prices in order to gain substantial market demand. .
CONDUCT.
In focusing on the conduct of the computer industry, one simply has to look at the industry leaders of the past and present. These leaders practically established the conduct of the industry by way of their competitive strategies, pricing behavior, and production and distribution policies. The leaders of the industry are IBM (past) and Microsoft (present). IBM started, and Microsoft sustained the conduct of the industry. The conduct of IBM (in reference to hardware) and Microsoft (in reference to software) resulted in positive financial gains, but presented potential threats to social welfare. .
There were several strategies that IBM initiated to gain substantial market share as the computer industry began to expand. Whereas these strategies worked early in the industry when IBM had a virtual monopoly in the computer hardware industry, many of these strategies are weak in today's more competitive computer industry. One strategy developed by IBM was to create knowledge and preference for its computer by giving educational institutions deep discounts on its machines. This strategy enabled many generations to be knowledgeable about IBM machines as it also created a preference for IBM among new graduates who were seeking a computer.