Hello, have you met my friend Ubuntu?

Paul Gift —  28 September 2007

Hello everyone!  I’m glad and excited to be a new part of Truth on the Market.  I’d like to thank Josh for inviting me.  Unfortunately, I’ll be very busy through the end of the year so I probably won’t get to post with great frequency, but I look forward to posting more in the future.

I want to note that I’m an economist, not a lawyer.  I worked in litigation consulting for a few years so I have a basic familiarity with antitrust law, but I don’t and won’t pretend to be an expert when it comes to matters of law.  My opinions will come from my economic perspective.

I got a random e-mail the other day from someone at a website called www.globalization.eu.  It occurred after my addition to TOTM, so I wonder if that had something to do with it.  Anyway, the e-mail made me laugh so I figured I’d share it with everyone in my first post.  The e-mail references the following document: http://www.globalisation.eu/publications/unbundlingmicrosoftwindows.pdf.  The author recommends that, to enhance competition, the European Union (EU) require that the Windows operating system not be “bundled” with computers.  In general, bundling is when a company sells two or more goods together for one price.  It can take different forms: pure, mixed, technical.

So, why did I laugh?  First, in my mind, bundling is something that a manufacturer may choose to do with its own products (e.g. bundling shampoo and conditioner, left shoes and right shoes, etc.).  Personally, I wouldn’t say that nails come bundled with the house, tires come bundled with the car, or Intel processors come bundled with the computer.  I would describe them as inputs purchased in a competitive (or reasonably competitive) input market.

Second, the idea that “Microsoft has over 90% market share so we need to allow consumers to choose so we can break into Microsoft’s dominance” is funny to me.  Do you know what else we need to do?????  We need to outlaw the “bundling” of Intel processors in computers so that consumer choice will bust up Intel’s monopoly power!  We have got to outlaw the “bundling” of iPod connectivity and stereo controls with automobiles!  It’s imperative that we outlaw the “bundling” of those darn nails with houses!  I know, I know……there’s not a dominant nail supplier so there’s no need for the latter.  Well, suppose there was, and one nail company had over 90% market share.  Would welfare be improved with a regulation “unbundling” nails from houses, giving consumers a choice?  No!  There’s already competition and choice in the market at the builder level.  On top of that, the end-consumer can still choose to purchase from alternative builders (or alternative auto makers or OEMs in the other examples) or not at all.  Nail companies compete to supply home builders.  Tire companies compete to supply automobile manufacturers.  Intel, AMD, and other processor companies compete to supply processors to OEMs.  If the end-consumers’ preferences are strong enough towards one brand or another, competition and consumer choice between home builders, auto makers, and OEMs will tend to induce them to adjust.  If consumers strongly prefer an alternative, cheaper operating system, do you not think OEMs, competing in an aggressive marketplace, trying to earn profits, will listen?

It’s not scientific, but here’s some anecdotal evidence.  I went to Dell’s website and, within a few clicks, found www.dell.com/open.  They offer Windows-free computers installed instead with Ubuntu Linux or FreeDOS.  The short video in the lower right-hand corner mentions that Dell chose to offer Ubuntu because of the large number of consumer requests on their suggestion box webpage.  So, markets really do tend to adjust to changes in consumer preferences?  Interesting.

Anyway, I just wanted to share that story.  It’s good to be here.  Goodnight, God bless, and Ubuntu…….

3 responses to Hello, have you met my friend Ubuntu?

  1. 

    Are left shoes and right shoes really considered bundled? No one says “I’m going to go out and by a shoe.” Not really the main point of your post, but thought I’d throw that in there. Ubuntu to you too.

  2. 

    Welcome, Paul! I look forward to many more insightful posts.

  3. 

    Great post Paul. Welcome on board!