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INTRODUCTION
Technology in general and software products in particular have in recent times become intertwined with the daily lives of the people in the developed world. As for the developing economies, an increasing level of involvement with technology is clearly emerging, as it becomes a part of their daily life too. The significance of the industry is expected only to grow over time as technology continues to play a very important role in the lives of the citizens all over the world. As such it is natural that the operation of the industry engaged in such production activity will remain a major public policy concern, and be under the microscope for public scrutiny. As is known, the existence of a free and competitive market environment is the cornerstone of capitalism. A basic goal of the government antitrust regulation is to help create such an environment by discouraging, and if needed, by curbing monopoly. Gilbert and Newbery (1994) have empirically demonstrated how competition can lead to production and allocation efficiency. The traditional argument against monopoly that market power leads to a deadweight loss for the society, through production and allocation inefficiency, is empirically supported by the works of many authors. (See, for example, Young 1997).
Microsoft is the largest software firm in the world producing both the operating system and the application software for personal computers. Despite ongoing changes in the information technology industry, Microsoft Corporation is likely to continue to dominate the operating system (OS) and software industry by catering to the needs of consumers. However, the way the market structure for the computer industry evolves over time in general, and specifically Microsoft's dominance in the industry, will continue to occupy the center stage, and thereby create a ground for continued public attention, and perhaps, to the point of a significant concern.
It is against the backdrop of the foregoing discussion that allegations have surfaced to the effect that Microsoft has been gaining its market power, through unfair business practices, beginning from the early 1990s, something denied by the Microsoft management. In view of such conflicting claims, the need for an economic analysis to empirically determine whether or not Microsoft actually possesses monopoly power and if so, whether it uses this power to sabotage competition...