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

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Author Info

  • Casadesus-Masanell, Ramon

    ()
    (IESE Business School)

  • Ghemawat, Pankaj

    ()
    (Harvard Business School)

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    Abstract

    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.

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    Bibliographic Info

    Paper provided by IESE Business School in its series IESE Research Papers with number D/519.

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    Length: 40 pages
    Date of creation: 23 Sep 2003
    Date of revision:
    Handle: RePEc:ebg:iesewp:d-0519

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    Postal: IESE Business School, Av Pearson 21, 08034 Barcelona, SPAIN
    Web page: http://www.iese.edu/
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    Related research

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

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    References

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    1. Schmidt, Klaus M. & Schnitzer, Monika, 2003. "Public Subsidies for Open Source? Some Economic Policy Issues of the Software Market," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3793, C.E.P.R. Discussion Papers.
    2. Lerner, Josh & Tirole, Jean, 2002. "Some Simple Economics of Open," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 50(2), pages 197-234, June.
    3. Joseph Farrell & Garth Saloner, 1984. "Standardization, Compatibility and Innovation," Working papers 345, Massachusetts Institute of Technology (MIT), Department of Economics.
    4. Joseph Farrell & Garth Saloner, 1986. "Installed Base and Compatibility, With Implications for Product Preannouncements," Working papers 411, Massachusetts Institute of Technology (MIT), Department of Economics.
    5. Bruce Kogut & Anca Metiu, 2001. "Open-Source Software Development and Distributed Innovation," Oxford Review of Economic Policy, Oxford University Press, Oxford University Press, vol. 17(2), pages 248-264, Summer.
    6. Justin Pappas Johnson, 2002. "Open Source Software: Private Provision of a Public Good," Journal of Economics & Management Strategy, Wiley Blackwell, Wiley Blackwell, vol. 11(4), pages 637-662, December.
    7. Dalle, Jean-Michel & Jullien, Nicolas, 2003. "'Libre' software: turning fads into institutions?," Research Policy, Elsevier, Elsevier, vol. 32(1), pages 1-11, January.
    8. A. M. Spence, 1981. "The Learning Curve and Competition," Bell Journal of Economics, The RAND Corporation, The RAND Corporation, vol. 12(1), pages 49-70, Spring.
    9. Jürgen Bitzer & Philipp J. H. Schröder, 2002. "Bug-Fixing and Code-Writing: The Private Provision of Open Source Software," Discussion Papers of DIW Berlin 296, DIW Berlin, German Institute for Economic Research.
    10. Ross, David R, 1986. "Learning to Dominate," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 34(4), pages 337-53, June.
    11. David, Paul A, 1985. "Clio and the Economics of QWERTY," American Economic Review, American Economic Association, American Economic Association, vol. 75(2), pages 332-37, May.
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    Cited by:
    1. repec:ste:nystbu:05-11 is not listed on IDEAS
    2. Fabrizio Cesaroni & Paola Giuri, 2005. "Intellectual Property Rights and Market Dynamics," LEM Papers Series, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy 2005/10, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    3. Evangelos Katsamakas & Mingdi Xin, 2005. "An economic analysis of enterprise adoption of open source software," Working Papers, NET Institute 05-29, NET Institute, revised Oct 2005.
    4. Josh Lerner & Jean Tirole, 2004. "The Economics of Technology Sharing: Open Source and Beyond," NBER Working Papers 10956, National Bureau of Economic Research, Inc.
    5. Bitzer, Jurgen, 2004. "Commercial versus open source software: the role of product heterogeneity in competition," Economic Systems, Elsevier, Elsevier, vol. 28(4), pages 369-381, December.
    6. Alexandre Gaudeul, 2004. "Competition between open-source and proprietary software: the (La)TeX case study," Industrial Organization, EconWPA 0409007, EconWPA.

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