How would Microsoft act as a Monopoly in the gaming console market?
You can already see how different console powers would act as a monopoly because the already have their own monopolies. The platform holders such as Nintendo, Microsoft, Sony all have their own specific monopolies within their respective Wii, DS, PSP, Xbox and Playstation families. Microsoft is unique in that it really has two monopolies at the same level in the HD realm so they give a clearer picture about how they will act.
Microsoft works with AMD, Nvidia and Intel to develop the specifications of direct X whilst working with content providers, giving them what they want in terms of technical help and tools. So this relationship looks like this:
Consumers >< Developers >< Microsoft >< Intel/AMD/Nvidia >< Developers
In effect Microsoft doesn't deal directly with consumers but they help developers and tool manufacturers directly. They are the middleman in this relationship, the facilitator really. >< represents a two way relationship between them. All you have to do is listen to their presentations and see how they act to see how this is true.
We have seen time and again how one of Microsofts key goals/strategies is to work directly with developers and publishers and this mirrors their Direct3d Mononopy where they have almost complete power. So its doubtful they will change it if they gained market dominance. They are actually concerned about the performance and success of third parties on their platform.
This relationship is really multi-level, and only Microsoft deals with hardware manufacturers themselves.
So on the top level it looks like this Microsoft >< Hardware manufactures/designers.
The next level looks like this Consumers >< Microsoft >< Developers/Publishers >< Consumers
Because in this relationship they have two distinct set of stake-holders who are the most important. Consumers and Developers/Publishers. So they would in effect develop their hardware around what they percieve the Consumers wish for and they what Developers want in terms of delivering great content that people wish to buy. Obviously even a monopoly has to satisfy its consumers and I doubt that will change. People may hate Windows because its expensive, but they rarely lay the complaint that its useless to their needs.
Complaints about monopolies
The two complaints people make about monopolies are these:
1. The taking of monopolistic rents, aka more than a fair profit.
2. Absolute dominance and control stiffling innovation.
With complaint number 1: Every company from Nintendo to Microsoft is guilty of this, Nintendo is using its monopoly as we speak to garner incredible profits. So this is not a complaint you could lay directly at Microsofts feet to say we want someone else to hold the monopoly more than you.
With complaint number 2: We can see from Microsofts actions where they hold complete power, they also wield it fairly by working with other companies and setting standards rather than dictating. For example in the Direct 3d specification Microsoft holds the chairmans vote: Only used as a tie breaker not to dictate the direction the hardware moves.
Should you be afraid of a monopoly?
There are reasons to be distrustful and there are reasons why its best one standard is held. Look at the Blu Ray/DVD monopolies. The companies involved set the standard, they reap the profits but everyone benifits in the end from consumers, to movie studios to retailers. One could argue that the benifits of a monopoly in certain industries justifies the "economic rent" or monopolistic profits taken by one company. In the games industry, having a single dominant platform simplifies the industry and the consumers benifit in the end as much as the platform holder. Many people said that the PS1/PS2 days had some of the best games and this has a lot to do with the unification of the platform.
So should you be afraid of a Microsoft monopoly? No, not unless a Nintendo or Sony monopoly terrifies you as well. Microsoft has proved that they can work with developers and consumers and even under their power they still allow innovation to thrive.