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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;

    This paper has been announced in the following NEP Reports:

    References

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    1. A. M. Spence, 1981. "The Learning Curve and Competition," Bell Journal of Economics, The RAND Corporation, vol. 12(1), pages 49-70, Spring.
    2. 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.
    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, 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, vol. 11(4), pages 637-662, December.
    7. Ross, David R, 1986. "Learning to Dominate," Journal of Industrial Economics, Wiley Blackwell, vol. 34(4), pages 337-53, June.
    8. Lerner, Josh & Tirole, Jean, 2002. "Some Simple Economics of Open," Journal of Industrial Economics, Wiley Blackwell, vol. 50(2), pages 197-234, June.
    9. David, Paul A, 1985. "Clio and the Economics of QWERTY," American Economic Review, American Economic Association, vol. 75(2), pages 332-37, May.
    10. Dalle, Jean-Michel & Jullien, Nicolas, 2003. "'Libre' software: turning fads into institutions?," Research Policy, Elsevier, vol. 32(1), pages 1-11, January.
    11. 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.
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    Citations

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    Cited by:
    1. Alexandre Gaudeul, 2004. "Competition between open-source and proprietary software: the (La)TeX case study," Industrial Organization 0409007, EconWPA.
    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. 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.
    6. Evangelos Katsamakas & Mingdi Xin, 2005. "An economic analysis of enterprise adoption of open source software," Working Papers 05-29, NET Institute, revised Oct 2005.

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