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Amici Curiae: "Friends of the court." Interested third parties in a legal action are sometimes allowed to make arguments to the court in the capacity of an "amicus curiae," Latin for "friend of the court." Barriers to Entry: Barriers to entry are factors which make it difficult for a new competitor to break into a market. Some barriers to entry include patents and intellectual property rights, control over essential capital resources, buyer preference for established brands, government licensing or protective legislation, and the existence of increasing returns to sale. The presence of barriers to entry reduces the amount of competition because potential competitors are prevented from enterin the market. Barriers to entry can lead to monopolies or markets dominated by a few large firms. Essential Facility: The "essential facilities" doctrine, sometimes referred to as "bottleneck" monopoly theory, interprets the Sherman Act to cover situations where a business refuses to allow competitors access to an essential facility over which that business has a monopoly in the absence of a legitimate business reason, even if that monopoly is legitimately acquired. In United States v. Terminal Railway Association, the Supreme Court ruled that an association of railroads that controlled access to the only methods of transporting railroad cars across the Mississippi River in St. Louis were required to provide access to those transportation facilities to competitors on reasonable terms. The Terminal case represents an application the essential facilities doctrine. First mover advantage: In a market characterized by high barriers to entry or increasing returns to scale, the first company to introduce a new product or innovation can gain a substantial competitive advantage which is difficult for competitors to overcome. This is referred to as first mover advantage. An intitial head start can quickly become an insurmountable lead in market share. See also: lock-in Increasing Returns to Scale: A market is characterized by increasing returns to scale when the price of producing an additional unit of a product (the marginal cost of the product) goes down as the quantity of the product produced goes up. Electric power and other public utilities are examples of markets that exhibit increasing returns to scale. Most of the cost of providing electric power comes from setting up the infrastructure of power lines. Once that infrastructure is in place, pumping more and more power over those lines costs little. The presence of increasing returns to scale means that large companies can produce more efficiently than small companies. See also: first mover advantage, lock-in, natural monopoly Innovation Competition: Most discussions of competition focus on price competition, where businesses seek to offer superior products at lower prices than competing firms in order to attract customers. Innovation competition refers to another type of competition in which businesses seek to attract customers by introducing new technological innovations. In an industry where a business has acquired a large amount of market share, it is often in the interest of that business to suppress innovation as much as possible so as to avoid threats to its comfortable position as market leader. For example, the Department of Justice took legal action fifty years ago when major U.S. automakers collectively agreed not to develop certain pollution control technologies. Lock-in: The phenomenon known as "lock-in", which is also referred to as "path dependence", occurs when a particular technology emerges as a standard and remains one for reasons other than the quality of the technology.
Source: Consent Decree Marginal Cost: The cost of producing an additional unit of a product. Computer software has high fixed costs (costs that are independent of the number of units produced) because developing and testing software is expensive but insignificant marginal costs, since once a software program is written it can be cheaply and easily copied as many times as desired. Minimum Commitment: A licensing arrangement where the licensee is obligated to pay a minimum sum, regardless of the amount of sales. Source: Consent Decree Natural monopoly: A market that has high natural barriers to entry (usually because of increasing returns to scale) is referred to as a natural monopoly because such a market has a tendency to become a monopoly. Indeed, in the presence of increasing returns to scale, a market that consists of a single large producer is the most economically efficient. Traditionally, governments have dealt with natural monopolies by granting an official monopoly to a business and introducing regulations placing substantial controls on the behaviors in which that business is allowed to engage. (e.g. what pricing schemes are allowable). Electical power and telecommunications are examples of natural monopolies that have been subject to government regulation. Recently, however, there has been a move in the United States towards deregulation of telecommunications and attempts to restructure markets so that the conditions that produce natural monopolies are eliminated. NDA: Non-Disclosure Agreement. A pre-commercial release agreement that restricts any disclosure of information regarding the product. Most Software companies ask employees to sign NDAs in order to protect trade secrets. Source: Consent Decree Network Externality: A market exhibits a network externality when the value of each unit of a product increases with each unit sold. For example, the value of owning a telephone comes from being able to communicate with other people who also own telephones. If very few people own telephones, then a telephone is not particularly useful. If almost everyone owns a telephone, then it becomes valuable for you to own one. OEM: Original Equipment Manufacturer. Companies such as Compaq or Dell who construct and distribute computers but not operating system software. Source: Consent Decree OSR: OEM Service Release. Most software companies make many changes to their software between official releases, and provide these changes to customers and OEMs in the form of service releases. Per Processor Agreement: An Operating System licensing agreement where the licensee pays a royalty based on the number of processors they sell regardless of what OS is on the machine. This arrangement was used by Microsoft to penalize OEMs for licensing other OS software - they would essentially pay two royalties for non-Microsoft software. Source: Consent Decree Tipping: A market is said to "tip" when it quickly moves from a competitive state to a state where a single firm gains almost total market share. Vertical integration is the process whereby different aspects of a business, "upstream" and "downstream" -- ranging from sourcing raw materials and production to marketing -- are brought together. In the oil business a company which is primarily engaged in the production of crude petroleum may decide to engage in vertical integration by acquiring downstream refineries and distribution networks. Similarly, a company strong in its downstream operations may try to engage in vertical integration by investing more in exploration and development and acquiring a greater stake in the production process. Vertical integration may also occur when complementary companies make long term contracts with one another or joint ventures, or if they decide to merge. Vertical integration should not be confused with horizontal integration, or movements toward greater oligopoly or monopoly within an industry. However, vertical integration may encourage tendencies toward oligopoly by offering the integrated companies a competitive edge against their less integrated rivals. Source: http://menic.utexas.edu/menic/utaustin/course/oilcourse/vertical.html Vaporware refers to the practice by which a company announces/markets a product far in advance of the actual release date for that product. While in most cases vaporware suggests tardiness on behalf of a company, it can also be used as a marketing tactic to arouse enthusiasm for a product and command market share. Writ of Mandamus: An order issued by a superior court commanding the performance of a specific action. In the Microsoft case, Microsoft petitioned the US Circuit Court of Appeals for a Writ of Mandamus to overturn the District Court's decision to keep Lawrence Lessig as Special Master. Source: WWWebster Dictionary |