Open Source Development in a Differentiated Duopoly
AbstractOpen source software is released under an open source license giving individuals the right to use, modify, and redistribute freely the programs. This paper proposes a model of differentiated duopoly in which firms invest in the development of proprietary or open source software. The main findings are: (i) firms invest more when the products are substitutes; (ii) for substitute products, firms’ investment in software development is greatest when the software is open source; (iii) for close to perfect complements, firms’ investment in software development is greatest when the software is proprietary; and (iv) for substitute products, investment in open source software yields higher profits than investment in proprietary software.
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Bibliographic InfoPaper provided by The University of Western Australia, Department of Economics in its series Economics Discussion / Working Papers with number 06-05.
Length: 28 pages
Date of creation: 2006
Date of revision:
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-06-03 (All new papers)
- NEP-COM-2006-06-03 (Industrial Competition)
- NEP-ICT-2006-06-03 (Information & Communication Technologies)
- NEP-IND-2006-06-03 (Industrial Organization)
- NEP-MIC-2006-06-03 (Microeconomics)
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