Matt Yglesias of Slate Moneybox makes the following interesting claim regarding Consumer Surplus:
As I wrote when his retirement was announced, Steve Ballmer is an American hero who plunged Microsoft’s enormous Office/Windows profits into futile efforts to compete with Google, Sony, Apple, and others. Very few of those Ballmer investments paid off for Microsoft shareholders, but they generated huge amounts of consumer surplus by preventing other firms (and especially Google) from becoming predatory monopolists. The clear risk is that post-Ballmer Microsoft will be run along principles of narrowminded shareholder value maximization and the world will lose out as a result.
Does this make sense? Under what assumptions? More generally, who is Microsoft’s greatest competitor? As we’ll read in Ronald Coase, under certain conditions you can have a single supplier and yet have price close to the competitive marginal cost level.