We analyze the central economic issues raised by U.S. v Microsoft. Network effects
and economies of scale in applications programs created a barrier to entry for new
operating system competitors, which the combination of Netscape Navigator and the
Java programming language potentially could have lowered. Microsoft took actions
to eliminate this threat to its operating system monopoly, and some of Microsoft's
conduct very likely harmed consumers. While we recognize the risks of the government's
proposed structural remedy of splitting Microsoft in two, we are pessimistic that
a limited conduct remedy would be effective in this case.