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When to make proprietary software open source

Author

Listed:
  • Caulkins, Jonathan P.
  • Feichtinger, Gustav
  • Grass, Dieter
  • Hartl, Richard F.
  • Kort, Peter M.
  • Seidl, Andrea

Abstract

Software can be distributed closed source (proprietary) or open source (developed collaboratively). While a firm cannot sell open source software, and so loses potential sales revenue, the open source software development process can have a substantial positive impact on the quality of a software, its diffusion, and, consequently, the demand for a complementary product from which the firm does profit. Previous papers have considered the firm's option to release software under a closed or open source license as a simple once and for all binary choice. We extend this research by allowing for the possibility of keeping software proprietary for some optimally determined finite time period before making it open source. Furthermore, we study the impact of switching costs.

Suggested Citation

  • Caulkins, Jonathan P. & Feichtinger, Gustav & Grass, Dieter & Hartl, Richard F. & Kort, Peter M. & Seidl, Andrea, 2013. "When to make proprietary software open source," Journal of Economic Dynamics and Control, Elsevier, vol. 37(6), pages 1182-1194.
    • Handle: RePEc:eee:dyncon:v:37:y:2013:i:6:p:1182-1194
    DOI: 10.1016/j.jedc.2013.02.009
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Hasnas, Irina & Lambertini, Luca & Palestini, Arsen, 2014. "Open Innovation in a dynamic Cournot duopoly," Economic Modelling, Elsevier, vol. 36(C), pages 79-87.
    2. Xing Gao, 2020. "Open Source or Closed Source? A Competitive Analysis with Software Security," Decision Analysis, INFORMS, vol. 17(1), pages 56-73, March.
    3. Jeongmeen Suh & Murat Yılmaz, 2019. "Economics of Open Source Technology: A Dynamic Approach," Dynamic Games and Applications, Springer, vol. 9(1), pages 254-280, March.
    4. Luigi Balletta & Antonio Tesoriere, 2020. "Cumulative innovation, open source, and distance to frontier," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 22(6), pages 1875-1920, December.
    5. Murat Yılmaz, 2022. "Coexistence of proprietary and open‐source firms under product differentiation," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(8), pages 4153-4166, December.
    6. Seidl, Andrea & Caulkins, Jonathan P. & Hartl, Richard F. & Kort, Peter M., 2018. "Serious strategy for the makers of fun: Analyzing the option to switch from pay-to-play to free-to-play in a two-stage optimal control model with quadratic costs," European Journal of Operational Research, Elsevier, vol. 267(2), pages 700-715.
    7. Tesoriere, Antonio & Balletta, Luigi, 2017. "A dynamic model of open source vs proprietary R&D," European Economic Review, Elsevier, vol. 94(C), pages 221-239.
    8. Soomro, Zahoor Ahmed & Shah, Mahmood Hussain & Ahmed, Javed, 2016. "Information security management needs more holistic approach: A literature review," International Journal of Information Management, Elsevier, vol. 36(2), pages 215-225.
    9. Seidl, Andrea, 2019. "Zeno points in optimal control models with endogenous regime switching," Journal of Economic Dynamics and Control, Elsevier, vol. 100(C), pages 353-368.
    10. Elke Moser & Andrea Seidl & Gustav Feichtinger, 2014. "History-dependence in production-pollution-trade-off models: a multi-stage approach," Annals of Operations Research, Springer, vol. 222(1), pages 457-481, November.

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    More about this item

    Keywords

    Open source; Optimal control; Multi-stage modeling; Complementary product; Software;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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