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On platforms, incomplete contracts, and open source software

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  • Niedermayer, Andras

Abstract

We analyze investment incentives for a firm A owning a software platform and an application and a firm B deciding whether to develop a new application for the platform. While B's entry helps the success of the platform, B fears ex post expropriation by A and is hence reluctant to enter and invest. We show that different platform governance structures prevalent in the Information and Communication Technology industry (integrated, proprietary, standardized, open source platform) serve to balance investment incentives for the platform and for the applications.

Suggested Citation

  • Niedermayer, Andras, 2013. "On platforms, incomplete contracts, and open source software," International Journal of Industrial Organization, Elsevier, vol. 31(6), pages 714-722.
    • Handle: RePEc:eee:indorg:v:31:y:2013:i:6:p:714-722
    DOI: 10.1016/j.ijindorg.2013.07.003
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    Cited by:

    1. Thomas Le Texier & Mourad Zeroukhi, 2015. "How Can Proprietary Software Firms Take Advantage Over Open Source Communities? Another Story of Pro?fitable Piracy," Economics Working Paper Archive (University of Rennes & University of Caen) 201503, Center for Research in Economics and Management (CREM), University of Rennes, University of Caen and CNRS.
    2. Kevin Boudreau, 2010. "Open Platform Strategies and Innovation: Granting Access vs. Devolving Control," Management Science, INFORMS, vol. 56(10), pages 1849-1872, October.
    3. Llanes, Gastón & de Elejalde, Ramiro, 2013. "Industry equilibrium with open-source and proprietary firms," International Journal of Industrial Organization, Elsevier, vol. 31(1), pages 36-49.
    4. Niedermayer, Andreas, 2015. "Does a Platform Monopolist Want Competition?," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 523, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    5. Halonen-Akatwijuka, Maija & Pafilis, Evagelos, 2020. "Common ownership of public goods," Journal of Economic Behavior & Organization, Elsevier, vol. 180(C), pages 555-578.
    6. Atal Vidya & Shankar Kameshwari, 2015. "Developers’ Incentives and Open-Source Software Licensing: GPL vs BSD," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 15(3), pages 1381-1416, July.
    7. Niedermayer Andras, 2015. "Does a Platform Monopolist Want Competition?," Review of Network Economics, De Gruyter, vol. 14(1), pages 1-44, March.
    8. 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.
    9. Gastón Llanes, 2019. "Competitive strategy for open and user innovation," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 28(2), pages 280-297, April.
    10. Tobias Kretschmer & Aija Leiponen & Melissa Schilling & Gurneeta Vasudeva, 2022. "Platform ecosystems as meta‐organizations: Implications for platform strategies," Strategic Management Journal, Wiley Blackwell, vol. 43(3), pages 405-424, March.

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    Keywords

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    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

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