Summary of Written Testimony of Microsoft Witness Professor Richard L.Schmalensee

“Professor Richard Schmalensee, Dean of the Massachusetts
Institute of Technology Sloan School of Management, is one of the
leading industrial organization economists in the United

“Microsoft innovates relentlessly to improve its operating
system products. As a result, “the quality-adjusted prices of
Microsoft’s operating systems have declined tremendously over
time.” (“Quality-adjusted” takes account of the rapidly increasing
functionality of Windows with each new release.) Microsoft has
worked hard to develop ever-improved versions of Windows both to
increase the capability and ease of use of its software for
consumers and to respond to competition from rivals such as the
Apple Mac, which has recently regained share; established PC-based
OSs such as IBM’s OS/2; emerging software-based solutions such as
network computers; and various types of UNIX, in particular

“… the ‘growth of Linux exemplifies the exceedingly low
barriers to entry in the software business.’… Today software
developers are writing applications for Linux and the PalmPC
platform, and developers have shown renewed interest in the Apple
Macintosh now that Apple has released a new range of computers that
is proving popular with consumers.”

“Microsoft’s development and distribution of its Web browsing
software — the central focus of Plaintiffs’ case — reduced the
prices that consumers paid for Web browsing software, expanded the
output of Web browsing software, increased innovation in Web
browsing software, and improved the quality of Microsoft’s
operating system.”

Complete testimony summary