Open Source, Dual Licensing and Software Competition
To distribute software, commercial vendors of proprietary software have the opportunity to use some dual licensing (DL) strategy i.e. to provide their software under two different licensing terms (proprietary and open source). We investigate the relevance and impacts of this distribution strategy in the presence of an incumbent open source software competitor. We determine the conditions for this strategy to be profitable for the commercial firm and its impact on price, market shares and welfare. We show that dual licensing may be used as a complement for proprietary software when development spillovers are large. We examine how, in this case, a dual licensing strategy can be used to exclude the open source software from the market and how this is compatible with higher price and lower market share for the proprietary distribution. This situation can also generate conflicts of interests between proprietary software and users resulting in sub-optimal outcomes. Finally, our analysis reveals the key role played by development spillovers and software compatibility for the DL decision.
|Date of creation:||Mar 2014|
|Date of revision:|
|Contact details of provider:|| Postal: CREM (UMR CNRS 6211) – Faculty of Economics, 7 place Hoche, 35065 RENNES Cedex|
Phone: 02 23 23 35 47
Fax: (33) 2 23 23 35 99
Web page: http://crem.univ-rennes1.fr/
More information through EDIRC
|Order Information:|| Postal: CREM (UMR CNRS 6211) - Faculty of Economics, 7 place Hoche, 35065 Rennes Cedex - France|
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.:
- Nicholas Economides & Evangelos Katsamakas, 2005.
"Two-sided competition of proprietary vs. open source technology platforms and the implications for the software industry,"
05-06, NET Institute.
- Nicholas Economides & Evangelos Katsamakas, 2006. "Two-Sided Competition of Proprietary vs. Open Source Technology Platforms and the Implications for the Software Industry," Management Science, INFORMS, vol. 52(7), pages 1057-1071, July.
- Nicholas Economides & Evangelos Katsamakas, 2004. "Two-sided competition of proprietary vs. open source technology platforms and the implications for the software industry," Working Papers 04-30, New York University, Leonard N. Stern School of Business, Department of Economics.
- Nicholas Economides & Evangelos Katsamakas, 2004. "Two-sided competition of proprietary vs. open source technology platforms and the implications for the software industry," Working Papers 04-22, NET Institute, revised Aug 2004.
- Nicholas Economides & Evangelos Katsamakas, 2005. "Two-sided competition of proprietary vs. open source technology platforms, and the implications for the software industry," Working Papers 05-02, NET Institute, revised Oct 2005.
- Jean-Michel Dalle & Nicolas Jullien, 2003.
""Libre" software : turning fads into institutions?,"
- Chaim Fershtman & Neil Gandal, 2011. "Direct and indirect knowledge spillovers: the “social network” of open‐source projects," RAND Journal of Economics, RAND Corporation, vol. 42(1), pages 70-91, 03.
- Josh Lerner & Jean Tirole, 2004.
"The Economics of Technology Sharing: Open Source and Beyond,"
NBER Working Papers
10956, National Bureau of Economic Research, Inc.
- Josh Lerner & Jean Tirole, 2005. "The Economics of Technology Sharing: Open Source and Beyond," Journal of Economic Perspectives, American Economic Association, vol. 19(2), pages 99-120, Spring.
- Eric von Hippel, 2007. "Horizontal innovation networks—by and for users," Industrial and Corporate Change, Oxford University Press, vol. 16(2), pages 293-315, April.
- Ashish Arora & Farasat A. S. Bokhari, 2007. "OPEN VERSUS CLOSED FIRMS AND THE DYNAMICS OF INDUSTRY EVOLUTION -super-," Journal of Industrial Economics, Wiley Blackwell, vol. 55(3), pages 499-527, 09.
- 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.
- Gastón Llanes & Ramiro de Elejalde, 2009. "Industry Equilibrium with Open Source and Proprietary Firms," Harvard Business School Working Papers 09-149, Harvard Business School.
- Lanzi, Diego, 2009. "Competition and open source with perfect software compatibility," Information Economics and Policy, Elsevier, vol. 21(3), pages 192-200, August.
- Stefano Comino & Fabio M. Manenti, 2007.
"Dual licensing in open source software markets,"
Department of Economics Working Papers
0718, Department of Economics, University of Trento, Italia.
- Bonaccorsi, Andrea & Rossi, Cristina, 2003. "Why Open Source software can succeed," Research Policy, Elsevier, vol. 32(7), pages 1243-1258, July.
- Éric Darmon & Thomas Le texier & Dominique Torre, 2011.
"Proprietary or open source software? Winner-takes-all competition, partial adoption and efficiency,"
Revue d'économie industrielle,
De Boeck Université, vol. 0(4), pages 109-140.
- Eric Darmon & Thomas Le Texier & Dominique Torre, 2011. "Proprietary or Open Source Software? Winner-Takes-All Competition, Partial Adoption and Efficiency," Post-Print halshs-00723656, HAL.
- Haruvy, Ernan & Prasad, Ashutosh, 2005. "Freeware as a competitive deterrent," Information Economics and Policy, Elsevier, vol. 17(4), pages 513-534, October.
- Ramon Casadesus-Masanell & Gaston Llanes, 2009.
09-06, NET Institute, revised Sep 2009.
- Vineet Kumar & Brett R. Gordon & Kannan Srinivasan, 2011. "Competitive Strategy for Open Source Software," Marketing Science, INFORMS, vol. 30(6), pages 1066-1078, November.
- Scotchmer, Suzanne, 2010.
"Openness, Open Source, and the Veil of Ignorance,"
Competition Policy Center, Working Paper Series
qt4d9052w7, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
- Ramon Casadesus-Masanell & Pankaj Ghemawat, 2006. "Dynamic Mixed Duopoly: A Model Motivated by Linux vs. Windows," Management Science, INFORMS, vol. 52(7), pages 1072-1084, July.
- Rolandsson, Bertil & Bergquist, Magnus & Ljungberg, Jan, 2011. "Open source in the firm: Opening up professional practices of software development," Research Policy, Elsevier, vol. 40(4), pages 576-587, May.
When requesting a correction, please mention this item's handle: RePEc:tut:cremwp:201405. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (CODA-POIREY Hélène)
If references are entirely missing, you can add them using this form.