Economic theory states that as the number of competitors approaches infinity, then the price will equal marginal cost. After a certain point, the difference between the price and the marginal cost will be small enough that it doesn't matter, but 4 is not really close to that point.

Your analysis also requires very limited barriers to entry/exit. The current cell providers are experts on creating barriers to entry - for example, restrictive 3-year contracts that prevent the customer base from migrating to a better provider.

Other commenters are right: the price is based on supply as much as demand. However in this case the main determinant of the supply is the price since other factors are negligible (things like labour or other input costs). The price will be determined by demand - which, I may add, is rather inelastic given how addictive text messages are.

Of course, the economic analysis of text-messaging services is much more sophisticated than the back-of-napkin stuff we have here. Maybe we should stop applying introductory economics courses to where they do not belong.

There doesn't need to be just one alternative to IE. How many people do you think switched from IE to Firefox and then back to IE because they thought Firefox sucked? Or switched from IE6 to Firefox and then to IE7? I know a number of my non-techie friends did this, they liked the way IE7 did things more than Firefox. Maybe Chrome will attract some of those users.

It seems like everywhere, people are praising the spread of Linux, or arguing against it, or blah blah. My question is, why do Linux geeks care if Linux gains market share? There's no profits to be made or anything like that. If average Joe User used Linux, then I wouldn't have the excuse of, "no I can't fix your computer, because I don't use Windows." Why do we want to spread Linux?