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Dynamic mixed duopoly: A model motivated by Linux vs. Windows


  • Casadesus-Masanell, Ramon

    () (IESE Business School)

  • Ghemawat, Pankaj

    () (Harvard Business School)


This paper analyzes a dynamic mixed duopoly in which a profit-maximizing competitor interacts with a competitor that prices at zero (or marginal cost), with the cumulation of output affecting their relative positions over time. The modeling effort is motivated by interactions between Linux, an open-source operating system, and Microsoft's Windows in the computer server segment, and consequently emphasizes demand-side learning effects that generate dynamic scale economies (or network externalities). Analytical characterizations of the equilibrium under such conditions are offered, and some comparative static and welfare effects are examined.

Suggested Citation

  • Casadesus-Masanell, Ramon & Ghemawat, Pankaj, 2003. "Dynamic mixed duopoly: A model motivated by Linux vs. Windows," IESE Research Papers D/519, IESE Business School.
  • Handle: RePEc:ebg:iesewp:d-0519

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    References listed on IDEAS

    1. Farrell, Joseph & Saloner, Garth, 1986. "Installed Base and Compatibility: Innovation, Product Preannouncements, and Predation," American Economic Review, American Economic Association, vol. 76(5), pages 940-955, December.
    2. Joseph Farrell & Garth Saloner, 1985. "Standardization, Compatibility, and Innovation," RAND Journal of Economics, The RAND Corporation, vol. 16(1), pages 70-83, Spring.
    3. Lerner, Josh & Tirole, Jean, 2002. "Some Simple Economics of Open," Journal of Industrial Economics, Wiley Blackwell, vol. 50(2), pages 197-234, June.
    4. Bruce Kogut & Anca Metiu, 2001. "Open-Source Software Development and Distributed Innovation," Oxford Review of Economic Policy, Oxford University Press, vol. 17(2), pages 248-264, Summer.
    5. Dalle, Jean-Michel & Jullien, Nicolas, 2003. "'Libre' software: turning fads into institutions?," Research Policy, Elsevier, vol. 32(1), pages 1-11, January.
    6. 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.
    7. Joseph Farrell & Garth Saloner, 1985. "Installed Base and Compatibility With Implications for Product Preannouncements," Working papers 385, Massachusetts Institute of Technology (MIT), Department of Economics.
    8. Schmidt, Klaus M. & Schnitzer, Monika, 2003. "Public Subsidies for Open Source? Some Economic Policy Issues of the Software Market," CEPR Discussion Papers 3793, C.E.P.R. Discussion Papers.
    9. Ross, David R, 1986. "Learning to Dominate," Journal of Industrial Economics, Wiley Blackwell, vol. 34(4), pages 337-353, June.
    10. David, Paul A, 1985. "Clio and the Economics of QWERTY," American Economic Review, American Economic Association, vol. 75(2), pages 332-337, May.
    11. 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.
    12. A. M. Spence, 1981. "The Learning Curve and Competition," Bell Journal of Economics, The RAND Corporation, vol. 12(1), pages 49-70, Spring.
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    Cited by:

    1. 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.
    2. repec:ste:nystbu:05-11 is not listed on IDEAS
    3. Josh Lerner & Jean Tirole, 2005. "The Economics of Technology Sharing: Open Source and Beyond," Journal of Economic Perspectives, American Economic Association, vol. 19(2), pages 99-120, Spring.
    4. Fabrizio Cesaroni & Paola Giuri, 2005. "Intellectual Property Rights and Market Dynamics," LEM Papers Series 2005/10, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    5. Evangelos Katsamakas & Mingdi Xin, 2005. "An economic analysis of enterprise adoption of open source software," Working Papers 05-29, NET Institute, revised Oct 2005.
    6. Alexandre Gaudeul, 2004. "Competition between open-source and proprietary software: the (La)TeX case study," Industrial Organization 0409007, EconWPA.

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    open-source software; network effects; microsoft; linux; competitive dynamics; strategy;

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