Daily Policy Digest
Anti-Trust
June 12, 2000
Hurting Microsoft Hurts The Entire Computer Industry
The general argument for breaking up Microsoft is that it would have positive results for the economy and the rest of the computer industry. But a recent study says that the antitrust case is bad for the computer industry because it's very interconnected, and hurting Microsoft hurts the rest of the industry.
Between 1991 and 1997, the study found that:
- During each pro-antitrust announcement, Microsoft's stock went down 1.2 percent, while the other computer firms suffered a loss of 0.5 to 0.6 percent, on average.
- During each anti-antitrust announcement, Microsoft's stock rose 2.3 percent, while the other computer firms enjoyed a gain of 1.2 percent, on average.
- Of the past 54 antitrust events, in only 3 instances did Microsoft and the rest of the computer industry react in substantially different ways.
The study suggests that the antitrust case is reducing capital inflow to the computer industry by lowering returns on investment.
Source: "The Stock Market's Verdict of Microsoft's Antitrust Case," Economic Intuition, Spring 2000. Based on: George Bittlingmayer and Thomas W. Hazlett, "DOS Kapital: Has antitrust action against Microsoft created value in the computer industry?" Journal of Financial Economics, March 2000.
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