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Open Source Development in a Differentiated Duopoly

  • Stephane Verani

    ()

    (Department of Economics, The University of Western Australia)

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    Open source software is released under an open source license giving individuals the right to use, modify, and redistribute freely the programs. This paper proposes a model of differentiated duopoly in which firms invest in the development of proprietary or open source software. The main findings are: (i) firms invest more when the products are substitutes; (ii) for substitute products, firms’ investment in software development is greatest when the software is open source; (iii) for close to perfect complements, firms’ investment in software development is greatest when the software is proprietary; and (iv) for substitute products, investment in open source software yields higher profits than investment in proprietary software.

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    File URL: http://www.biz.uwa.edu.au/home/research/discussionworking_papers/economics?f=147008
    File Function: First version, 2006
    Download Restriction: no

    Paper provided by The University of Western Australia, Department of Economics in its series Economics Discussion / Working Papers with number 06-05.

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    Length: 28 pages
    Date of creation: 2006
    Date of revision:
    Handle: RePEc:uwa:wpaper:06-05
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    Web page: http://www.business.uwa.edu.au/school/disciplines/economics

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    1. Josh Lerner & Jean Tirole, 2004. "The Economics of Technology Sharing: Open Source and Beyond," NBER Working Papers 10956, National Bureau of Economic Research, Inc.
    2. Josh Lerner & Jean Tirole, 2002. "The Scope of Open Source Licensing," NBER Working Papers 9363, National Bureau of Economic Research, Inc.
    3. Richard J. Gilbert & Michael L. Katz, 2001. "An Economist's Guide to U.S. v. Microsoft," Industrial Organization 0106001, EconWPA.
    4. 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.
    5. Rabah Amir & John Wooders, 1998. "One-Way Spillovers, Endogenous Innovator/Imitator Roles and Research Jointventures," CIE Discussion Papers 1998-10, University of Copenhagen. Department of Economics. Centre for Industrial Economics.
    6. Hertel, Guido & Niedner, Sven & Herrmann, Stefanie, 2003. "Motivation of software developers in Open Source projects: an Internet-based survey of contributors to the Linux kernel," Research Policy, Elsevier, vol. 32(7), pages 1159-1177, July.
    7. Alexandre Gaudeul, 2004. "Competition between open-source and proprietary software: the (La)TeX case study," Industrial Organization 0409007, EconWPA.
    8. Häckner, Jonas, 1999. "A Note on Price and Quantity Competition in Differentiated Oligopolies," Research Papers in Economics 1999:9, Stockholm University, Department of Economics.
    9. Xavier Vives, 2001. "Oligopoly Pricing: Old Ideas and New Tools," MIT Press Books, The MIT Press, edition 1, volume 1, number 026272040x, June.
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