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Open Source Development in a Differentiated Duopoly

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  • Stephane Verani

    (Department of Economics, The University of Western Australia)

Abstract

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.

Suggested Citation

  • Stephane Verani, 2006. "Open Source Development in a Differentiated Duopoly," Economics Discussion / Working Papers 06-05, The University of Western Australia, Department of Economics.
    • Handle: RePEc:uwa:wpaper:06-05
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    File URL: https://ecompapers.biz.uwa.edu.au/paper/PDF%20of%20Discussion%20Papers/2006/06_05_Verani.pdf
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    References listed on IDEAS

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    Cited by:

    1. Reisinger, Markus & Ressner, Ludwig & Schmidtke, Richard & Thomes, Tim Paul, 2014. "Crowding-in of complementary contributions to public goods: Firm investment into open source software," Journal of Economic Behavior & Organization, Elsevier, vol. 106(C), pages 78-94.
    2. Sebastian von Engelhardt, 2010. "Quality Competition or Quality Cooperation? License-Type and the Strategic Nature of Open Source vs. Closed Source Business Models," Jena Economics Research Papers 2010-034, Friedrich-Schiller-University Jena.

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