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Public Subsidies for Open Source? Some Economic Policy Issues of the Software Market

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Author Info
Schmidt, Klaus M.
Schnitzer, Monika

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Abstract

This Paper discusses the economic merits of direct or indirect governmental support for open source projects. Software markets differ from standard textbook markets in three important respects that may give rise to market failures: (i) large economies of scale, (ii) crucially important innovations, (iii) significant network effects and switching costs. We analyse the differences between proprietary software and open source software with respect to these market features and ask whether open source as an alternative to proprietary software can mitigate these problems. Then we discuss the implications of various forms of governmental support for open source.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3793.

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Date of creation: Feb 2003
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Handle: RePEc:cpr:ceprdp:3793

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Related research
Keywords: innovation incentives open source public goods public subsidies software market

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Find related papers by JEL classification:
H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
O31 - Economic Development, Technological Change, and Growth - - Technological Change - - - Innovation and Invention: Processes and Incentives
O38 - Economic Development, Technological Change, and Growth - - Technological Change - - - Government Policy

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Aghion, P. & Howitt, P., 1989. "A Model Of Growth Through Creative Destruction," UWO Department of Economics Working Papers 8904, University of Western Ontario, Department of Economics.
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  2. Lerner, Josh & Tirole, Jean, 2002. "Some Simple Economics of Open," Journal of Industrial Economics, Blackwell Publishing, vol. 50(2), pages 197-234, June. [Downloadable!] (restricted)
  3. Coase, Ronald H, 1972. "Durability and Monopoly," Journal of Law & Economics, University of Chicago Press, vol. 15(1), pages 143-49, April.
  4. Holmstrom, Bengt, 1999. "Managerial Incentive Problems: A Dynamic Perspective," Review of Economic Studies, Blackwell Publishing, vol. 66(1), pages 169-82, January. [Downloadable!] (restricted)
  5. Bengt Holmstrom, 1999. "Managerial Incentive Problems: A Dynamic Perspective," NBER Working Papers 6875, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. Harhoff, Dietmar & Henkel, Joachim & von Hippel, Eric, 2003. "Profiting from voluntary information spillovers: how users benefit by freely revealing their innovations," Research Policy, Elsevier, vol. 32(10), pages 1753-1769, December. [Downloadable!] (restricted)
  7. Sobel, Joel, 1991. "Durable Goods Monopoly with Entry of New Consumers," Econometrica, Econometric Society, vol. 59(5), pages 1455-85, September. [Downloadable!] (restricted)
  8. Gul, Faruk & Sonnenschein, Hugo & Wilson, Robert, 1986. "Foundations of dynamic monopoly and the coase conjecture," Journal of Economic Theory, Elsevier, vol. 39(1), pages 155-190, June. [Downloadable!] (restricted)
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  10. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S71-102, October. [Downloadable!] (restricted)
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  11. Willig, Robert D, 1976. "Consumer's Surplus without Apology," American Economic Review, American Economic Association, vol. 66(4), pages 589-97, September. [Downloadable!] (restricted)
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Cited by:
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  1. Casadesus-Masanell, Ramon & Ghemawat, Pankaj, 2003. "Dynamic mixed duopoly: A model motivated by Linux vs. Windows," IESE Research Papers D/519, IESE Business School. [Downloadable!]
  2. Marcel Boyer & Jacques Robert, 2006. "The Economics of Free and Open Source Software: Contributions to a Government Policy on Open Source Software," CIRANO Project Reports 2006rp-03, CIRANO. [Downloadable!]
  3. Stefano Comino & Fabio M. Manenti, 2003. "Open Source vs Closed Source Software: Public Policies in the Software Market," Industrial Organization 0306001, EconWPA. [Downloadable!]
  4. Thorsten Wichmann & Pio Baake, 2003. "Open Source Software, Competition and Potential Entry," Berlecon Research Papers 0005, Berlecon Research. [Downloadable!]
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