Casey B. Mulligan is an economics professor at the University of Chicago.

As Apple introduces a range of new products, it is worth remembering that there is no such thing as a monopoly in the computer industry.

Today's Economist Perspectives from expert contributors.

Fourteen years ago, the Justice Department accused Microsoft of maintaining a monopoly in personal-computer operating systems and expressed concern that Microsoft would extend that monopoly.

At the time, 90 to 95 percent of personal computers powered by Intel processors were running a Microsoft operating system. Some analysts said that this left PC owners little choice, and that Microsoft was preventing the marketplace from functioning well. Others suggested that the market was functioning quite well and that so many PCs ran a Microsoft operating system because of the combination of low price, desirable features and networking advantages.

Two years later, a federal district judge agreed with Department of Justice and ordered Microsoft to be broken into several technology companies – a ruling later vacated by a higher court.



Watching Apple introduce some amazing products last week, including laptops (which have been running Intel processors for several years now) and operating systems for mobile and desktop devices, it is difficult to imagine that the Justice Department once thought that, without government intervention, consumer choices would be significantly limited by Microsoft.

Interestingly, on Tuesday, Microsoft announced that it was introducing a tablet, the Surface, that will compete in the strong and growing market dominated by Apple’s iPad. Market forces are clearly working to give consumers choices in the market.

The first chart below shows Apple’s share price as a ratio of Microsoft’s, both on a monthly basis and adjusted for dividends and splits. The ratio is normalized to one in June 1998, when Justice filed its antitrust suit. I have indicated some of the interesting market events that began a significant movement of customers away from Microsoft and toward Apple: the introduction of a Windows-compatible iPod, the opening of the iTunes store and the introduction of the iPhone (both a phone and a pocket-sized personal computer, running an operating system written by Apple).

finance.yahoo.com

Now, relative to Microsoft’s share value, Apple share values have increased almost 60 times, largely because of Apple’s new products and the market’s anticipation of its future products. This next chart from Asymco.com shows some of that history by quantifying the number of number of personal computers shipped in each year since 1975.

The Rise and Fall of Personal Computing

Asymco.com

The chart shows PCs (which here means I.B.M.-compatible lineage, primarily running a Microsoft operating system) overtaking other personal-computing machines in the mid-1980s. However, in the mid-2000s Macintosh and iPhone shipments took off, soon followed by iPads and Androids. By 2011, PCs were less than half of all shipments.

In the computer industry at least, current market shares are no guarantee of future success. What might appear to be monopolies are frequently and decisively broken by innovative competitors rather than antitrust regulators.