Pray tell, how can one "flood" a market which is based on intangible goods whose duplication cost is near zero?
So packaging, manuals, distribution, development, advertising, warehousing, and all the other work that went into software in the 80s & 90s cost "near zero?"
My god man, custom runs of floppy disks alone were $1 or more, and most products included multiple floppies. When CDs first came out there were substantial mastering costs involved in pressed discs, and the per-disc price was also measured in dollars, not cents.
You really need to realize that Steam wasn't available in 1986.
Windows 7 is not a "low quality product."
No it isn't, but Vista, the preceding product, was. It was such a low quality product that Microsoft was forced to roll up their sleeves and fix all the problems in it, then had the gall to charge us all for it.
When they did the same thing in Windows 98 Second Edition, at least they released a megapatch that updated long-suffering Windows 98 owners to Windows 98 SE. Similarly, when Apple released OS X 10.1 they gave it away free to everyone who owned OS X 10.0.
Seriously, what the hell.
Really? Bill Gates held a gun to their heads and forced them, did he?
If by gun you mean requiring them to pay him money for a Windows license even if they didn't ship a copy of Windows with the system or, if they didn't want to agree to those terms, pay a substantially inflated price for Windows licenses that would have made their business uncompetitive... then yes he did.