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Consumer Welfare and Market Structure in a Model of Competition Between Open Source and Proprietary Software

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  • Alexia Gaudeul

    (Centre for Competition Policy, University of East Anglia)

Abstract

I consider a Vickrey-Salop model of spatial product differentiation with quasi-linear utility functions and contrast two modes of production, the proprietary model where entrepreneurs sell software to the users, and the open source model where users participate in software development. I show that the OS model of production may be more efficient from the point of view of welfare that the proprietary model, but that an OS industry is vulnerable to entry by entrepreneurs while a proprietary industry can resist entry by OS projects. A mixed industry where OS and proprietary development methods coexist may exhibit large OS projects cohabiting with more specialized proprietary projects, and is more efficient than the proprietary model of production from the point of view of welfare.

Suggested Citation

  • Alexia Gaudeul, 2008. "Consumer Welfare and Market Structure in a Model of Competition Between Open Source and Proprietary Software," Working Papers 08-31, Centre for Competition Policy, University of East Anglia.
    • Handle: RePEc:ccp:wpaper:wp08-31
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    Cited by:

    1. German Lambardi, 2009. "Software Innovation and the Open Source threat," Working Papers 09-15, NET Institute, revised Sep 2009.

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    More about this item

    Keywords

    open source; proprietary; software industry; copyright; non-profit organization; mixed market; welfare; spatial product differentiation;
    All these keywords.

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • H44 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Goods: Mixed Markets
    • L17 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Open Source Products and 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
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy

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