Advanced Economic Theory

Abstract

Apple Incorperation is one of the most sought-after computer campany

Introduction

The world wide web is very strong and has changed the word in many ways.

As a fan of Apple Macintosh,I am personally impressed with many of its innovations.It strikes me whether or not the company has really become monopoly.

This paper will explore its business model and its so called

I will closely examine Apple in different areas

-PC market

-software

-portable player

-music

Then the second part deals with the judging of its monopoly position based on the microeconomic aspects.

Apple Inc.

Apple is truly a unique entity, both in what it accomplishes and in how it is organized.During the course of the Macintosh Revolution, Steve Jobs was forced out of Apple. It is no surprise that the Macintosh revolution started to fail rapidly with his departure, despite some attempts during his absence to alter the business model. With Steve Jobs back in the campany, and Mac OS X released, Apple's future is very bright.

Firstly, in order to be able to judge if it Apple is a monopoly or not, we need to know what does monopoly actually means

The definition of Monopoly

Monopoly is “A situation in which a single company owns all or nearly all of the market for a given type of product or service. This would happen in the case that there is a barrier to entry into the industry that allows the single company to operate without competition (for example, vast economies of scale, barriers to entry, or governmental regulation). In such an industry structure, the producer will often produce a volume that is less than the amount which would maximize social welfare”.

So according to the definition above, we will see if Apple is a monopoly or not.

Apple operating system

We all know that in order to use Apple’s operating system or Mac OS, one needs to own a Mac,the only place that this particular system can be run on. The "monopoly" is the fact that you can not buy Mac OS and install it on a computer from another vendor - so you are stuck with overpriced item from a single vendor. Also,

Apple has always provided a complete computing experience. From the very beginning Apple sold the hardware, operating system and the basic applications one would need.

However, most people think that monopoly is measured in terms of market share. This is also misunderstood. People would say that a company with 5% market share for personal computers cannot be a monopoly. But in this case, Apple has 100% market share of the its own platform. When one walks into a store, they know that they are going to buy a PC or that they are going to buy a Macintosh. There’s really no trading off features each time, as there is between different PC’s. You are buying the OS. You don’t want to learn a new one. You don’t even want things that are different.

We can say that Apple is using their dominance over their own platform to dominate the OS software

Digital music

In the area of digital music players and digital content delivery

, in a way, Apple has no monopoly position that denies competitors from offering similar products. The iPod is sold on retail shelves next to competing players. Apple sells the iPod but it also sells audio and video content via its music store. The iPod had become popular before the iTunes Store had really gotten off the ground. But since Apple only allowed the iPod to use the DRM ( Digital Rights Management) for it's music store, iPod users had no choice in terms of where to buy their music online.Furthermore, Digital music is a mass market. Apple doesn't make the only digital music player available in the market. However, They may have the best, but as long as there are competitors in the market, there is no monopoly. You can import songs into your iPod with programs other than iTunes, that is what Anapod and iPod Explorer are for. As such, ITunes is defenitely not the only Online Music provider. Users are choosing to use this service, and choosing to buy iPods.

As the definition previously stated, what can be catagorized as monopoly are

-having berriers to entry

-practicing price discrimination

-does not maximize social wellfare

Berriers to entry

Having berriers to entry in this sense rather due to an inability for others to enter the Mac operating system or digital music market due to the fact that they cannot compete against Mac.

In fact, it is a bussiness model, in which the monopoly has the ability to prevent other players in, either by keeping price significantly low or making patent barriers, which ends up with only one option for the user. That's not the case for ipod/ITMS, you can buy any other mp3 devices, you can buy music from anywhere you would like, although itunes would be the best choice, but it does not prevent you from trying others. All business is about relationships. Apple, wants to keep a close relationship with its customers. Undoubtedly, these close relationships help it to understand the needs and wants of users.

In short, Apple uses its operating system monopoly power and application program dominance to try to eliminate competition, acquire control of new markets, and block innovation that could challenge its position.

Price Discrimination

Before judging if Apple practices price discrimination or not, we ought to define this term first. The practice of price discrimination means that a company charge different price for a particular product in the hope of reducing competition.

From this chart we can see that the sale of the songs perchased through itunes has sky rocketed as a result of the price that is cheaper compared to other