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Open Source vs Closed Source Software: Public Policies in the Software Market

Listed author(s):
  • Stefano Comino

    (Dipartimento di Scienze Economiche "M. Fanno" Universita' di Padova ITALY)

  • Fabio M. Manenti

    (Dipartimento di Scienze Economiche "M. Fanno" Universita' di Padova ITALY)

This paper analyses the impact of public policies supporting open source software (OSS). Users can be divided between those who know about the existence of OSS, the "informed" adopters, and the "uninformed" ones; the presence of uniformed users yields to market failures that justify government intervention. We study three policies: i) mandatory adoption, when government forces public agencies, schools and universities to adopt OSS, ii) information campaign, when the government informs the uninformed users about the existence and the characteristics of OSS and, iii) subsidisation, when consumers are payed a subsidy when adopting OSS. We show that the second policy enhances welfare, the third is always welfare decreasing while mandatory adoption can be either good or bad for society depending on the number of informed and uninformed adopters. We extend the model to the presence of network effects and we show that strong externalities require "drastic" policies.

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Paper provided by EconWPA in its series Industrial Organization with number 0306001.

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Length: 33 pages
Date of creation: 16 Jun 2003
Handle: RePEc:wpa:wuwpio:0306001
Note: Type of Document - pdf; prepared on Latex; to print on PostScript; pages: 33; figures: included
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  1. Schmidt, Klaus M. & Schnitzer, Monika, 2003. "Public Subsidies for Open Source? Some Economic Policy Issues of the Software Market," CEPR Discussion Papers 3793, C.E.P.R. Discussion Papers.
  2. Erik Brynjolfsson & Chris F. Kemerer, 1996. "Network Externalities in Microcomputer Software: An Econometric Analysis of the Spreadsheet Market," Management Science, INFORMS, vol. 42(12), pages 1627-1647, December.
  3. Shy,Oz, 2001. "The Economics of Network Industries," Cambridge Books, Cambridge University Press, number 9780521805001, March.
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