Consumer welfare and market structure in a model of competition between open source and proprietary software
AbstractI consider a Vickrey-Salop model of spatial product differentiation with quasi-linear utility functions and contrast two modes of production, the proprietary model where entrepreneurs sell software to the users, and the open source model where users participate in software development. I show that the OS model of production may be more efficient from the point of view of welfare that the proprietary model, but that an OS industry is vulnerable to entry by entrepreneurs while a proprietary industry can resist entry by OS projects. A mixed industry where OS and proprietary development methods coexist may exhibit large OS projects cohabiting with more specialized proprietary projects, and is more efficient than the proprietary model of production from the point of view of welfare.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 19555.
Date of creation: 29 Oct 2008
Date of revision:
open source; proprietary; software industry; copyright; non-profit organization; mixed market; welfare; spatial product differentiation;
Other versions of this item:
- Alexia Gaudeul, 2008. "Consumer Welfare and Market Structure in a Model of Competition Between Open Source and Proprietary Software," Working Papers, Centre for Competition Policy, University of East Anglia 08-31, Centre for Competition Policy, University of East Anglia.
- L17 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Open Source Products and Markets
- O31 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
- H44 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Goods: Mixed Markets
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Alexia Gaudeul, 2008.
"Open Source Licensing in Mixed Markets, or Why Open Source Software Does Not Succeed,"
Working Papers, Centre for Competition Policy, University of East Anglia
08-2, Centre for Competition Policy, University of East Anglia.
- Gaudeul, Alexia, 2008. "Open Source Licensing in Mixed Markets, or Why Open Source Software Does Not Succeed," MPRA Paper 19596, University Library of Munich, Germany.
- Timothy Besley & Maitreesh Ghatak, 2001.
"Government Versus Private Ownership Of Public Goods,"
The Quarterly Journal of Economics, MIT Press,
MIT Press, vol. 116(4), pages 1343-1372, November.
- Besley, Timothy J. & Ghatak, Maitreesh, 2001. "Government versus Private Ownership of Public Goods," CEPR Discussion Papers 2725, C.E.P.R. Discussion Papers.
- 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.
- Nicholas Economides & Evangelos Katsamakas, 2005.
"Two-sided competition of proprietary vs. open source technology platforms and the implications for the software industry,"
05-06, NET Institute.
- Nicholas Economides & Evangelos Katsamakas, 2006. "Two-Sided Competition of Proprietary vs. Open Source Technology Platforms and the Implications for the Software Industry," Management Science, INFORMS, INFORMS, vol. 52(7), pages 1057-1071, July.
- Nicholas Economides & Evangelos Katsamakas, 2005. "Two-sided competition of proprietary vs. open source technology platforms, and the implications for the software industry," Working Papers 05-02, NET Institute, revised Oct 2005.
- Nicholas Economides & Evangelos Katsamakas, 2004. "Two-sided competition of proprietary vs. open source technology platforms and the implications for the software industry," Working Papers 04-22, NET Institute, revised Aug 2004.
- Nicholas Economides & Evangelos Katsamakas, 2004. "Two-sided competition of proprietary vs. open source technology platforms and the implications for the software industry," Working Papers, New York University, Leonard N. Stern School of Business, Department of Economics 04-30, New York University, Leonard N. Stern School of Business, Department of Economics.
- Stefano Comino & Fabio Manenti, 2005. "Government Policies Supporting Open Source Software for the Mass Market," Review of Industrial Organization, Springer, vol. 26(2), pages 217-240, December.
- Mikko Mustonen, 2005. "When Does a Firm Support Substitute Open Source Programming?," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 14(1), pages 121-139, 03.
- 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.
- Alexandre Gaudeul, 2004.
"The LaTeX project: A case study of open-source software,"
Industrial Organization, EconWPA
- Alex Gaudeul, 2004. "The LaTeX project: A case study of open source software," Industrial Organization, EconWPA 0409010, EconWPA, revised 20 Apr 2005.
- Alesina, Alberto & Spolaore, Enrico, 1997.
"On the Number and Size of Nations,"
The Quarterly Journal of Economics, MIT Press,
MIT Press, vol. 112(4), pages 1027-56, November.
- Fershtman, Chaim & Gandal, Neil, 2004. "The Determinants of Output Per Contributor in Open Source Projects: An Empirical Examination," CEPR Discussion Papers 4329, C.E.P.R. Discussion Papers.
- Jeffrey P. Ballou, 2005. "An Examination of the Presence of Ownership Effects in Mixed Markets," Journal of Law, Economics and Organization, Oxford University Press, Oxford University Press, vol. 21(1), pages 228-255, April.
- Alex Gaudeul, 2005. "Public provision of a private good: What is the point of the BSD license?," Industrial Organization, EconWPA 0511002, EconWPA.
- JÃ¼rgen Bitzer & Philipp J.H. SchrÃ¶der, 2005. "The Impact of Entry and Competition by Open Source Software on Innovation Activity," Industrial Organization, EconWPA 0512001, EconWPA.
- Braid, Ralph M., 2004. "Uneven spacing in free-entry equilibrium for spatial product differentiation," Economics Letters, Elsevier, vol. 84(2), pages 155-161, August.
- Sebastian von Engelhardt & Sushmita Swaminathan, 2008. "Open Source Software, Closed Source Software or Both: Impacts on Industry Growth and the Role of Intellectual Property Rights," Discussion Papers of DIW Berlin 799, DIW Berlin, German Institute for Economic Research.
- Riccardo Leoncini & Francesco Rentocchini & Giuseppe Vittucci Marzetti, 2008. "You Won the Battle. What about the War? A Model of Competition between Proprietary and Open Source Software," Department of Economics Working Papers 0811, Department of Economics, University of Trento, Italia.
- Gaudeul Alex, 2007. "Do Open Source Developers Respond to Competition? The LATEX Case Study," Review of Network Economics, De Gruyter, vol. 6(2), pages 1-25, June.
- Franke, Nikolaus & Hippel, Eric von, 2003. "Satisfying heterogeneous user needs via innovation toolkits: the case of Apache security software," Research Policy, Elsevier, vol. 32(7), pages 1199-1215, July.
- Sloan, Frank A., 2000. "Not-for-profit ownership and hospital behavior," Handbook of Health Economics, Elsevier, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 21, pages 1141-1174 Elsevier.
- Gaudeul, Alexia & Mathieu, Laurence & Peroni, Chiara, 2008. "Blogs and the Economics of Reciprocal Attention," MPRA Paper 11298, University Library of Munich, Germany.
- 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.
- Ã‰ric Darmon & Thomas Le texier & Dominique Torre, 2011. "Proprietary or open source software? Winner-takes-all competition, partial adoption and efficiency," Revue d'Ã©conomie industrielle, De Boeck UniversitÃ©, vol. 0(4), pages 109-140.
- Epple, Dennis & Romano, Richard E, 1998. "Competition between Private and Public Schools, Vouchers, and Peer-Group Effects," American Economic Review, American Economic Association, vol. 88(1), pages 33-62, March.
- Vickrey, William S. & Anderson, Simon P. & Braid, Ralph M., 1999. "Spatial competition, monopolistic competition, and optimum product diversity," International Journal of Industrial Organization, Elsevier, vol. 17(7), pages 953-963, October.
- Bruno Frey, 1999. "State Support and Creativity in the Arts: Some New Considerations," Journal of Cultural Economics, Springer, vol. 23(1), pages 71-85, March.
- Harison, Elad & Koski, Heli, 2008. "Does Open Innovation Foster Productivity? Evidence from Open Source Software(OSS) Firms," Discussion Papers, The Research Institute of the Finnish Economy 1135, The Research Institute of the Finnish Economy.
- Bergstrom, Theodore & Blume, Lawrence & Varian, Hal, 1986. "On the private provision of public goods," Journal of Public Economics, Elsevier, vol. 29(1), pages 25-49, February.
- German Lambardi, 2009. "Software Innovation and the Open Source threat," Working Papers 09-15, NET Institute, revised Sep 2009.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.