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Dynamic Mixed Duopoly: A Model Motivated by Linux vs. Windows

  • Ramon Casadesus-Masanell

    ()

    (Harvard Business School, Boston, Massachusetts 02163 and Instituto de Estudios Superiores de Empresa, Avenue Pearson 21, Barcelona 08034, Spain)

  • Pankaj Ghemawat

    ()

    (Harvard Business School, Boston, Massachusetts 02163 and Instituto de Estudios Superiores de Empresa, Avenue Pearson 21, Barcelona 08034, Spain)

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    This paper analyzes a dynamic mixed duopoly in which a profit-maximizing competitor interacts with a competitor that prices at zero (or marginal cost), with the cumulation of output affecting their relative positions over time. The modeling effort is motivated by interactions between Linux, an open source operating system, and Microsoft's Windows and consequently emphasizes demand-side learning effects that generate dynamic scale economies (or network externalities). Analytical characterizations of the equilibrium under such conditions are offered, and some comparative static and welfare effects are examined.

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    File URL: http://dx.doi.org/10.1287/mnsc.1060.0548
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    Article provided by INFORMS in its journal Management Science.

    Volume (Year): 52 (2006)
    Issue (Month): 7 (July)
    Pages: 1072-1084

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    Handle: RePEc:inm:ormnsc:v:52:y:2006:i:7:p:1072-1084
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    1. Anderson, S.P. & de Palma, A. & Thisse, J.F., 1995. "Privatization and Efficiency in a Differentiated Industry," Papers 9505, Paris X - Nanterre, U.F.R. de Sc. Ec. Gest. Maths Infor..
    2. de Fraja, Giovanni & Delbono, Flavio, 1990. " Game Theoretic Models of Mixed Oligopoly," Journal of Economic Surveys, Wiley Blackwell, vol. 4(1), pages 1-17.
    3. CREMER, Helmuth & MARCHAND, Maurice & THISSE, Jacques-François, . "Mixed oligopoly with differentiated products," CORE Discussion Papers RP 930, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    4. David, Paul A, 1985. "Clio and the Economics of QWERTY," American Economic Review, American Economic Association, vol. 75(2), pages 332-37, May.
    5. Lerner, Josh & Tirole, Jean, 2002. "Some Simple Economics of Open," Journal of Industrial Economics, Wiley Blackwell, vol. 50(2), pages 197-234, June.
    6. Matsumura, Toshihiro, 1998. "Partial privatization in mixed duopoly," Journal of Public Economics, Elsevier, vol. 70(3), pages 473-483, December.
    7. Carl Shapiro, 1989. "The Theory of Business Strategy," RAND Journal of Economics, The RAND Corporation, vol. 20(1), pages 125-137, Spring.
    8. Bruce Kogut & Anca Metiu, 2001. "Open-Source Software Development and Distributed Innovation," Oxford Review of Economic Policy, Oxford University Press, vol. 17(2), pages 248-264, Summer.
    9. William C. Merrill & Norman Schneider, 1966. "Government Firms in Oligopoly Industries: A Short-Run Analysis," The Quarterly Journal of Economics, Oxford University Press, vol. 80(3), pages 400-412.
    10. A. M. Spence, 1981. "The Learning Curve and Competition," Bell Journal of Economics, The RAND Corporation, vol. 12(1), pages 49-70, Spring.
    11. Justin Pappas Johnson, 2002. "Open Source Software: Private Provision of a Public Good," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 11(4), pages 637-662, December.
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