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(Self-)Regulation of a Natural Monopoly via Complementary Goods - the Case of F/OSS Business Models

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The paper investigates the optimal regulation of a (software) firm which acts as a natural monopolist, who also offers a complementary good (IT services) on a competitive market. It is shown that a first-best-regulation accompanyied with an optimal taxation schedule in order to compensate the losses is equivalent to a cross-subsidisation of the software by the complementary good. This is the same result as in business models with Free/Open Source Software (F/OSS). Even if a price of zero for F/OSS does not reflect the use of resources for software development, the price system in F/OSS related markets leads to a welfare improving allocation. F/OSS license models can be seen as institutional arrangements which mimick a social planner.

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File URL: http://www.wiwi.uni-jena.de/Papers/wp-sw1805.pdf
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Paper provided by Friedrich-Schiller-Universität Jena, Wirtschaftswissenschaftliche Fakultät in its series Jenaer Schriften zur Wirtschaftswissenschaft with number 18/2005.

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Date of creation: 10 Nov 2005
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Handle: RePEc:jen:jenasw:2005-18

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Related research

Keywords: natural monopoly; regulation; Ramsey pricing; welfare; complementary good; Open Source Software;

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  1. Andreas Freytag & Dirk Schiereck & Thomas W. Thomas, 2005. "Consolidation and Market Power of Energy Utilities - The case of US-American and German Utility Takeovers," Jenaer Schriften zur Wirtschaftswissenschaft 07/2005, Friedrich-Schiller-Universität Jena, Wirtschaftswissenschaftliche Fakultät.
  2. Meijers,Huub & Hollanders,Hugo, 2003. "Sources of Growth: Measuring the Knowledge Based Economy," Research Memorandum 032, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
  3. Uwe Cantner & Jens Kruger & Kristina von Rhein, 2011. "Knowledge compensation in the German automobile industry," Applied Economics, Taylor & Francis Journals, vol. 43(22), pages 2941-2951.
  4. Uwe Cantner & Kristina Dre�ler & Jens J. Kr�ger, 2005. "Knowledge and Creative Destruction over the Industry Life Cycle - The Case of the German Automobile Industry," Jenaer Schriften zur Wirtschaftswissenschaft 05/2005, Friedrich-Schiller-Universität Jena, Wirtschaftswissenschaftliche Fakultät.
  5. Gilbert, Richard & Katz, Michael, 2001. "An Economist's Guide to U.S. v Microsoft," Competition Policy Center, Working Paper Series qt7kj1x7g9, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
  6. Braeutigam, Ronald R., 1989. "Optimal policies for natural monopolies," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 23, pages 1289-1346 Elsevier.
  7. Roland Helm & Reinhard Meckl & Nicole Sodeik, 2005. "Wissensmanagement - Ein Überblick zum Stand der empirischen Forschung," Jenaer Schriften zur Wirtschaftswissenschaft 04/2005, Friedrich-Schiller-Universität Jena, Wirtschaftswissenschaftliche Fakultät.
  8. d'ASPREMONT, Claude & CREMER, Jacques & GERARD-VARET, Louis-André, . "Incentives and the existence of Pareto-optimal revelation mechanisms," CORE Discussion Papers RP -902, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  9. Danny Quah, 2003. "Digital Goods and the New Economy," CEP Discussion Papers dp0563, Centre for Economic Performance, LSE.
  10. Gandal, Neil, 1995. "Competing Compatibility Standards and Network Externalities in the PC Software Market," The Review of Economics and Statistics, MIT Press, vol. 77(4), pages 599-608, November.
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