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You Won the Battle. What about the War? A Model of Competition between Proprietary and Open Source Software

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Author Info
Riccardo Leoncini ()
Francesco Rentocchini ()
Giuseppe Vittucci Marzetti ()

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Abstract

Although open source software has recently attracted a relevant body of economic literature, a formal treatment of the process of com- petition with its proprietary counterpart is still missing. Starting from an epidemic model of innovation di?usion, we try to ?ll this gap. We propose a model where the two competing technologies depend on dif- ferent factors, each one speci?c to its own mode of production (prof- its and developers’ motivations respectively), together with network e?ects and switching costs. As the speed of di?usion of these tech- nologies is crucial for the ?nal outcome, we endogenize the parame- ter in?uencing it across the population of adopters. We ?nd that an asymptotically stable equilibrium where both technologies coexist can always be present and, when the propagation coe?cient is endogenous, it coexists with winner–take–all solutions. Furthermore, an increase in the level of the switching costs for one technology increases the num- ber of its adopters, while reducing the number of the other one. If the negative network e?ects increase for one of the two technologies, then the equilibrium level of users of that technology decrease.

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Publisher Info
Paper provided by Department of Economics, University of Trento, Italia in its series Department of Economics Working Papers with number 0811.

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Date of creation: 2008
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Handle: RePEc:trn:utwpde:0811

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Related research
Keywords: Increasing returns; Open-source software; Technological competition; Technology di?usion;

Find related papers by JEL classification:
L17 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Open Source Products and Markets
L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
O33 - Economic Development, Technological Change, and Growth - - Technological Change - - - Technological Change: Choices and Consequences; Diffusion Processes

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References listed on IDEAS
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.:
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    Other versions:
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    Other versions:
  4. 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. [Downloadable!] (restricted)
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  12. Amable, Bruno, 1992. "Competition among Techniques in the Presence of Increasing Returns to Scale," Journal of Evolutionary Economics, Springer, vol. 2(2), pages 147-58, August.
  13. Lakhani, Karim R. & von Hippel, Eric, 2003. "How open source software works: "free" user-to-user assistance," Research Policy, Elsevier, vol. 32(6), pages 923-943, June. [Downloadable!] (restricted)
  14. 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. [Downloadable!] (restricted)
  15. Bonaccorsi, Andrea & Rossi, Cristina, 2003. "Why Open Source software can succeed," Research Policy, Elsevier, vol. 32(7), pages 1243-1258, July. [Downloadable!] (restricted)
  16. Massoud Karshenas & Paul L. Stoneman, 1993. "Rank, Stock, Order, and Epidemic Effects in the Diffusion of New Process Technologies: An Empirical Model," RAND Journal of Economics, The RAND Corporation, vol. 24(4), pages 503-528, Winter. [Downloadable!] (restricted)
    Other versions:
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Cited by:
(explanations, 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.)

  1. Alexia Gaudeul, 2008. "Consumer Welfare and Market Structure in a Model of Competition Between Open Source and Proprietary Software," Working Papers 08-31, Centre for Competition Policy, University of East Anglia. [Downloadable!]
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