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

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

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Markus Pasche () (University of Jena, Faculty of Economics)

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Markus Pasche

Abstract

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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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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Find related papers by JEL classification:
L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

This paper has been announced in the following NEP Reports:

NEP-ALL-2005-11-19 (All new papers)
NEP-COM-2005-11-19 (Industrial Competition)
NEP-MIC-2005-11-19 (Microeconomics)
NEP-PBE-2005-11-19 (Public Economics)

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Other versions:
- Uwe Cantner & Jens J. Krüger & Kristina Von Rhein, 2009. "Knowledge and Creative Destruction over the Industry Life Cycle: The Case of the German Automobile Industry," Economica, London School of Economics and Political Science, vol. 76(301), pages 132-148, 02. [Downloadable!] (restricted)
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