ECON 308 Lecture Notes - Fixed Cost
20 Apr 2013
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The ibm case: bundling software and services with hardware. Until 1968 ibm offered systems support and software with its computer systems at no separately stated charge. The government alleged that this bundling forced other hardware producers also to bundle, thus raising barriers to entry into the supposedly monopolized computer systems market. There was a large independent software industry, making it easy for hardware manufacturers to get the necessary software to produce a bundle. Ibm"s bundling in the early days was a response to consumer demand, providing a guarantee that computers would function and solve users" problems. Had consumers not wanted the bundle, ibm"s bundling would have made entry easier- not harder. Until the early 1970s, most of the control circuitry for disk drives was located in a separate box (the controller). These devices placed the control circuitry inside the central processor.
