Industry Equilibrium with Open Source and Proprietary Firms
AbstractWe present a model of industry equilibrium to study the coexistence of Open Source (OS) and Proprietary (P) firms. Two novel aspects of the model are: (1) participation in OS arises as the optimal decision of profit-maximizing firms, and (2) OS and P firms may (or may not) coexist in equilibrium. Firms decide their type and investment in R&D, and sell packages composed of a primary good (like software) and a complementary private good. The only difference between both kinds of firms is that OS share their technological advances on the primary good, while P keep their innovations private. The main contribution of the paper is to determine conditions under which OS and P coexist in equilibrium. Interestingly, this equilibrium is characterized by an asymmetric market structure, with a few large P firms and many small OS firms.
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Bibliographic InfoPaper provided by Harvard Business School in its series Harvard Business School Working Papers with number 09-149.
Length: 47 pages
Date of creation: Jun 2009
Date of revision:
Industry Equilibrium; Open Source; Innovation; Complementarity; Technology Sharing; Cooperation in R&D;
Other versions of this item:
- Llanes, Gastón & de Elejalde, Ramiro, 2013. "Industry equilibrium with open-source and proprietary firms," International Journal of Industrial Organization, Elsevier, vol. 31(1), pages 36-49.
- O31 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
- L17 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Open Source Products and Markets
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-07-11 (All new papers)
- NEP-COM-2009-07-11 (Industrial Competition)
- NEP-CSE-2009-07-11 (Economics of Strategic Management)
- NEP-INO-2009-07-11 (Innovation)
- NEP-IPR-2009-07-11 (Intellectual Property Rights)
- NEP-MIC-2009-07-11 (Microeconomics)
- NEP-SBM-2009-07-11 (Small Business Management)
- NEP-TID-2009-07-11 (Technology & Industrial Dynamics)
You can help add them by filling out this form.
Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- Open source and private firms can coexist
by Economic Logician in Economic Logic on 2009-08-14 14:17:00
- Andreas Freytag & Sebastian von Engelhardt, 2010. "Institutions, Culture, and Open Source," Jena Economic Research Papers 2010-010, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
- Ramon Casadesus-Masanell & Gaston Llanes, 2009.
09-06, NET Institute, revised Sep 2009.
- Sebastian von Engelhardt, 2010. "Quality Competition or Quality Cooperation? License-Type and the Strategic Nature of Open Source vs. Closed Source Business Models," Jena Economic Research Papers 2010-034, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
- Fershtman, Chaim & Gandal, Neil, 2011. "A Brief Survey of the Economics of Open Source Software," CEPR Discussion Papers 8434, C.E.P.R. Discussion Papers.
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