Google isn't bluffing

How are Google and Microsoft behaving?

• Product differentiation. Hoskins, et al, describe product differentiation, i.e. Google Chrome, as being worthwhile as long as the value added is greater than the cost of the differentiation. In Robert Cringley's view the value for Google in Chrome is in keeping Microsoft worrying about the threat of a new browser rather than deciding if they're going to take an illegal step to destroy the competition, though he doesn't explain how Chrome, which everyone admits is pretty mediocre, is keeping Microsoft awake at night.
• Google is part of an oligopoly, Microsoft has a monopoly. Their strategies are different. There is no competition for Windows, while Google does have to deal with other search engines, no matter how much of the market share they own. Cringely argues they are behaving as if they are competition, even though they are dependent on one another, and that there is some kind of standoff going on. Google isn't encouraging their employees to come up with new ideas just to keep them around or keep Microsoft distracted. They want to make money, and if they can find a way other than adds (I don't think they'd be fighting in court over their Google Books feature if they didn't really care about it), they will.