Competition and Innovation in a Technology Setting Software Duopoly
Recently the software industry has experienced fundamental changes in market structure through the entry of open source competitors, e.g. Linux's entry into the operating systems market. In a simple model we examine the effects of such a change in market structure from monopoly to duopoly under the assumption that software producers compete in technology rather than price or quantities. The model includes the presence of technological progress and menu costs of adjusting existing software, i.e. innovation. It is found that: (i) moving from monopoly to duopoly does increase the technology level set by firms in the software industry; (ii) a duopoly adjusts more readily to global technological progress than a monopolist. Furthermore, results are presented comparing open source versus for-profit firms in terms of technology levels and innovation.
|Date of creation:||2003|
|Contact details of provider:|| Postal: Mohrenstraße 58, D-10117 Berlin|
Web page: http://www.diw.de/en
More information through EDIRC
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.:
- Lerner, Josh & Tirole, Jean, 2002. "Some Simple Economics of Open," Journal of Industrial Economics, Wiley Blackwell, vol. 50(2), pages 197-234, June.
- Rotemberg, Julio J & Saloner, Garth, 1987.
"The Relative Rigidity of Monopoly Pricing,"
American Economic Review,
American Economic Association, vol. 77(5), pages 917-926, December.
- Julio J. Rotemberg & Garth Saloner, 1986. "The Relative Rigidity of Monopoly Pricing," NBER Working Papers 1943, National Bureau of Economic Research, Inc.
- Julio Rotemberg & Garth Saloner, 1986. "The Relative Rigidity of Monopoly Pricing," Working papers 414, Massachusetts Institute of Technology (MIT), Department of Economics.
- Bitzer, Jurgen & Schroder, Philipp J.H., 2005. "Bug-fixing and code-writing: The private provision of open source software," Information Economics and Policy, Elsevier, vol. 17(3), pages 389-406, July.
- Jürgen Bitzer & Philipp J. H. Schröder, 2002. "Bug-Fixing and Code-Writing: The Private Provision of Open Source Software," Discussion Papers of DIW Berlin 296, DIW Berlin, German Institute for Economic Research.