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When Does a Firm Support Substitute Open Source Programming?

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  • Mikko Mustonen
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    Abstract

    Software firms are observed to support programmers' communities, which develop rival open source programs. A firm selling a copyright program has an incentive to support substitute copyleft programming when support creates compatibility between the programs and programs exhibit network effects. Costly compatibility benefits the firm as its consumers gain access to the community's services but may also hurt the firm because it cannot profit from the valuation difference between incompatible networks. The incentive arises under a weak network effect even when the consumers' benefit is small. Standardization and enlarging the open source programmers' community do not always increase welfare. Copyright Blackwell Publishing 2005.

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    Bibliographic Info

    Article provided by Wiley Blackwell in its journal Journal of Economics & Management Strategy.

    Volume (Year): 14 (2005)
    Issue (Month): 1 (03)
    Pages: 121-139

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    Handle: RePEc:bla:jemstr:v:14:y:2005:i:1:p:121-139

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    Web page: http://www.kellogg.northwestern.edu/research/journals/JEMS/

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    Web: http://www.blackwellpublishing.com/journal.asp?ref=1058-6407&site=1

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    1. de Palma, Andre & Leruth, Luc, 1996. "Variable willingness to pay for network externalities with strategic standardization decisions," European Journal of Political Economy, Elsevier, vol. 12(2), pages 235-251, September.
    2. Justin Pappas Johnson, 2002. "Open Source Software: Private Provision of a Public Good," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 11(4), pages 637-662, December.
    3. Stanley M. Besen & Joseph Farrell, 1994. "Choosing How to Compete: Strategies and Tactics in Standardization," Journal of Economic Perspectives, American Economic Association, vol. 8(2), pages 117-131, Spring.
    4. Nicholas Economides, 1997. "Network Externalities, Complementarities, and Invitations to Enter," Industrial Organization 9701004, EconWPA.
    5. Yoon, Kiho, 2002. "The optimal level of copyright protection," Information Economics and Policy, Elsevier, vol. 14(3), pages 327-348, September.
    6. Koboldt, Christian, 1995. "Intellectual Property and Optimal Copyright Protection," CSLE Discussion Paper Series 95-01, Saarland University, CSLE - Center for the Study of Law and Economics.
    7. Banerjee, Dyuti S., 2003. "Software piracy: a strategic analysis and policy instruments," International Journal of Industrial Organization, Elsevier, vol. 21(1), pages 97-127, January.
    8. Franke, Nikolaus & Hippel, Eric von, 2003. "Satisfying heterogeneous user needs via innovation toolkits: the case of Apache security software," Research Policy, Elsevier, vol. 32(7), pages 1199-1215, July.
    9. King, Stephen P. & Lampe, Ryan, 2003. "Network externalities, price discrimination and profitable piracy," Information Economics and Policy, Elsevier, vol. 15(3), pages 271-290, September.
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    Cited by:
    1. Fabio Maria Manenti & Stefano Comino, 2010. "Dual Licensing in Open Source Software Markets," "Marco Fanno" Working Papers 0112, Dipartimento di Scienze Economiche "Marco Fanno".
    2. Scotchmer, Suzanne, 2010. "Openness, Open Source, and the Veil of Ignorance," Competition Policy Center, Working Paper Series qt4d9052w7, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
    3. Alexia Gaudeul, 2008. "Open Source Licensing in Mixed Markets, or Why Open Source Software Does Not Succeed," Working Papers 08-2, Centre for Competition Policy, University of East Anglia.
    4. Gaudeul, Alexia, 2008. "Consumer welfare and market structure in a model of competition between open source and proprietary software," MPRA Paper 19555, University Library of Munich, Germany.
    5. repec:ste:nystbu:05-11 is not listed on IDEAS
    6. Alex Gaudeul, 2005. "Public provision of a private good: What is the point of the BSD license?," Industrial Organization 0511002, EconWPA.

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