Chapter 6

Regulation in the Software Industry

Given the economic dynamics of the software industry, there have long been concerns about monopolist behavior of firms. As described in Chapter 3, software markets tend to be natural monopolies due to certain features such as network effects that create a cycle in which the strong get stronger and the weak get weaker. As a result, it is not uncommon for a leading software product to become dominant and tip the market to a monopoly.

Both IBM and Microsoft have been accused of monopolistic behavior to pre-empt competition, and these firms have entered into consent decrees with the U.S. Department of Justice to settle antitrust charges. Although there are significant concerns about monopolization in ...

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