Open Source vs. Proprietary Software: Competition and Compatibility
AbstractWe use a Hotelling linear city model to study competition between open source and proprietary software, where only the producer of the proprietary software aims at maximizing the profit. The producer of the proprietary software must decide on compatibility. Different compatibility strategies will lead to different network externality, and thus result in different profit for the producer of the proprietary software. We found that the proprietary producer¡¯s choice of compatibility strategy depends on the market coverage conditions. When the market is fully covered, one-way compatibility is the best strategy for the proprietary software. When the market is partly covered, two-way compatibility is the best strategy. Such results are not affected by software quality. Furthermore, when the provider of the open source software pursues the maximum market share rather than reacts passively, two-way compatibility would be the best choice for both the open source and the proprietary software. Moreover, the proprietary software producer does not favor its proprietary rival changing to open source software. Such a change may lower the social 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 EconWPA in its series Industrial Organization with number 0508008.
Date of creation: 10 Aug 2005
Date of revision:
Note: Type of Document - pdf
Contact details of provider:
Web page: http://18.104.22.168
Open Source Software; Proprietary Software; Compatibility; Competition;
Find related papers by JEL classification:
- L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
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.:
- Cremer, H. & Marchand, M. & Thisse, J.-F., 1987.
"The public firm as an instrument for regulating an oligopolistic market,"
CORE Discussion Papers
1987010, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Cremer, Helmuth & Marchand, Maurice & Thisse, Jacques-Francois, 1989. "The Public Firm as an Instrument for Regulating an Oligopolistic Market," Oxford Economic Papers, Oxford University Press, vol. 41(2), pages 283-301, April.
- Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-40, June.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA).
If references are entirely missing, you can add them using this form.