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Private Provision of a Complementary Public Good

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  • Richard Schmidtke

Abstract

For several years, an increasing number of ¯rms are investing in Open Source Software (OSS). While improvements in such a non- excludable public good cannot be appropriated, companies can bene¯t indirectly in a complementary proprietary segment. We study this incentive for investment in OSS. In particular we ask how (1) market entry and (2) public investments in the public good a®ects the ¯rms' production and pro¯ts. Surprisingly, we ¯nd that there exist cases where incumbents bene¯t from market entry. Moreover, we show the counter-intuitive result that public spending does not necessarily lead to a decreasing voluntary private contribution.

Suggested Citation

  • Richard Schmidtke, 2006. "Private Provision of a Complementary Public Good," Working Papers 004, Bavarian Graduate Program in Economics (BGPE).
    • Handle: RePEc:bav:wpaper:004_schmidtke
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    References listed on IDEAS

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    1. James W. Friedman, 1983. "Advertising and Oligopolistic Equilibrium," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 464-473, Autumn.
    2. Bergstrom, Theodore & Blume, Lawrence & Varian, Hal, 1986. "On the private provision of public goods," Journal of Public Economics, Elsevier, vol. 29(1), pages 25-49, February.
    3. Bitzer, Jurgen & Schroder, Philipp J.H., 2005. "Bug-fixing and code-writing: The private provision of open source software," Information Economics and Policy, Elsevier, vol. 17(3), pages 389-406, July.
    4. Andrea Shepard, 1987. "Licensing to Enhance Demand for New Technologies," RAND Journal of Economics, The RAND Corporation, vol. 18(3), pages 360-368, Autumn.
    5. Economides, Nicholas, 1996. "Network externalities, complementarities, and invitations to enter," European Journal of Political Economy, Elsevier, vol. 12(2), pages 211-233, September.
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    Cited by:

    1. Heijdra, Ben J. & Ligthart, Jenny E., 2007. "Fiscal policy, monopolistic competition, and finite lives," Journal of Economic Dynamics and Control, Elsevier, vol. 31(1), pages 325-359, January.
    2. Ramon Casadesus-Masanell & Gastón Llanes, 2011. "Mixed Source," Management Science, INFORMS, vol. 57(7), pages 1212-1230, July.
    3. Sebastian von Engelhardt, 2010. "Quality Competition or Quality Cooperation? License-Type and the Strategic Nature of Open Source vs. Closed Source Business Models," Jena Economics Research Papers 2010-034, Friedrich-Schiller-University Jena.
    4. Karamollah Bagherifard & Mohsen Rahmani & Vahid Rafe & Mehrbakhsh Nilashi, 2018. "A Recommendation Method Based on Semantic Similarity and Complementarity Using Weighted Taxonomy: A Case on Construction Materials Dataset," Journal of Information & Knowledge Management (JIKM), World Scientific Publishing Co. Pte. Ltd., vol. 17(01), pages 1-26, March.
    5. Bottai, Carlo, 2015. "Open Innovation in a Model à la Hotelling," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201526, University of Turin.
    6. Llanes, Gastón & de Elejalde, Ramiro, 2013. "Industry equilibrium with open-source and proprietary firms," International Journal of Industrial Organization, Elsevier, vol. 31(1), pages 36-49.
    7. Luigi Balletta & Antonio Tesoriere, 2020. "Cumulative innovation, open source, and distance to frontier," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 22(6), pages 1875-1920, December.

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    More about this item

    Keywords

    Open Source Software; Private Provision of Public Goods; Cournot- Nash Equilibrium; Complements; Market Entry;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

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