From: Wei Dai (weidai@eskimo.com)
Date: Fri Oct 01 1999 - 19:15:00 MDT
On Thu, Sep 30, 1999 at 02:38:18PM -0400, Robin Hanson wrote:
> A nice test to apply to economists is whether they
> have the courage to endorse politically unpopular
> positions that economic theory seems to support.
>
> Here is a nice example of such a test: do they
> support merging Intel and Microsoft?
Are there any economists that do support this position? It's not completely
obvious to me that the (social) benefit of the merge exceeds the cost.
Microsoft and Intel may already have captured some of the potential
benefits of merging through reciprical agreements to lower prices. Such
agreements may be explicit contracts or implicit in their pricing
strategies (e.g. analogies to tit-for-tat in the iterated prisoner's
dilemma game).
Also, assuming that most Microsoft shareholders also hold Intel stock,
shouldn't Microsoft already be maximizing some joint function of
Microsoft's profit and Intel's profit instead of maximizing Microsoft's
profit alone? It's the same reasoning that says a monopoly should set its
prices lower than the profit-maximizing level if its shareholders also buy
its products and price discrimination isn't possible.
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