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

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  • Schmidt, Klaus M.
  • Schnitzer, Monika

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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Bibliographic Info

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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References

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  1. Lerner, Josh & Tirole, Jean, 2002. "Some Simple Economics of Open," Journal of Industrial Economics, Wiley Blackwell, vol. 50(2), pages 197-234, June.
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  4. Holmstrom, Bengt, 1999. "Managerial Incentive Problems: A Dynamic Perspective," Review of Economic Studies, Wiley Blackwell, vol. 66(1), pages 169-82, January.
  5. Paul M Romer, 1999. "Endogenous Technological Change," Levine's Working Paper Archive 2135, David K. Levine.
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Citations

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Cited by:
  1. 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.
  2. Johnson, Justin P., 2006. "Collaboration, peer review and open source software," Information Economics and Policy, Elsevier, vol. 18(4), pages 477-497, November.
  3. Josh Lerner & Jean Tirole, 2004. "The Economics of Technology Sharing: Open Source and Beyond," NBER Working Papers 10956, National Bureau of Economic Research, Inc.
  4. Maria Alessandra Rossi, 2004. "Decoding the "Free/Open Source(F/OSS) Software Puzzle" a survey of theoretical and empirical contributions," Department of Economics University of Siena 424, Department of Economics, University of Siena.
  5. Schmidtke, Richard, 2006. "Private Provision of a Complementary Public Good," Discussion Papers in Economics 964, University of Munich, Department of Economics.
  6. Thorsten Wichmann & Pio Baake, 2003. "Open Source Software, Competition and Potential Entry," Berlecon Research Papers 0005, Berlecon Research.
  7. Di Gaetano, Luigi, 2012. "A Model of corporate donations to open source under hardware–software complementarity," MPRA Paper 39849, University Library of Munich, Germany.
  8. Schmidtke, Richard, 2006. "Private Provision of a Complementary Public Good," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 134, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  9. Stefano Comino & Fabio M. Manenti, 2003. "Open Source vs Closed Source Software: Public Policies in the Software Market," Industrial Organization 0306001, EconWPA.
  10. Stephen M. Maurer & Suzanne Scotchmer, 2006. "Open Source Software: The New Intellectual Property Paradigm," NBER Working Papers 12148, National Bureau of Economic Research, Inc.
  11. Thierry Pénard & Mourad Zeroukhi, 2013. "Open Source Software Subsidies and Network Compatibility in a Mixed Duopoly," Economics Working Paper Archive (University of Rennes 1 & University of Caen) 201339, Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS.
  12. Richard Schmidtke, 2006. "Private Provision of a Complementary Public Good," CESifo Working Paper Series 1756, CESifo Group Munich.
  13. Riccardo Leoncini & Francesco Rentocchini & Giuseppe Vittucci Marzetti, 2008. "You Won the Battle. What about the War? A Model of Competition between Proprietary and Open Source Software," Department of Economics Working Papers 0811, Department of Economics, University of Trento, Italia.
  14. 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.
  15. Jacques Crémer & Alexandre Gaudeul, 2004. "Quelques éléments d'économie du logiciel libre," Industrial Organization 0409004, EconWPA.
  16. Kristian Koerselman, 2008. "Can open sourcing lead to inferior standards?," Discussion Papers 27, Aboa Centre for Economics.
  17. Bitzer, Jurgen, 2004. "Commercial versus open source software: the role of product heterogeneity in competition," Economic Systems, Elsevier, vol. 28(4), pages 369-381, December.
  18. Lanzi, Diego, 2009. "Competition and open source with perfect software compatibility," Information Economics and Policy, Elsevier, vol. 21(3), pages 192-200, August.
  19. 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.
  20. Michiel Bijlsma & Paul de Bijl & Viktoria Kocsis, 2009. "Concurrentie, innovatie en intellectuele eigendomsrechten in software markten," CPB Document 181, CPB Netherlands Bureau for Economic Policy Analysis.
  21. Casadesus-Masanell, Ramon & Ghemawat, Pankaj, 2003. "Dynamic mixed duopoly: A model motivated by Linux vs. Windows," IESE Research Papers D/519, IESE Business School.

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