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

Author

Listed:
  • 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)

Abstract

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.

Suggested Citation

  • Stefano Comino & Fabio M. Manenti, 2003. "Open Source vs Closed Source Software: Public Policies in the Software Market," Industrial Organization 0306001, University Library of Munich, Germany.
    • 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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    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/io/papers/0306/0306001.pdf
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    References listed on IDEAS

    as
    1. Schmidt, Klaus & 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. Neil Gandal, 1994. "Hedonic Price Indexes for Spreadsheets and an Empirical Test for Network Externalities," RAND Journal of Economics, The RAND Corporation, vol. 25(1), pages 160-170, Spring.
    4. Shy,Oz, 2001. "The Economics of Network Industries," Cambridge Books, Cambridge University Press, number 9780521805001, September.
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    Cited by:

    1. Miralles, Francesc & Sieber, Sandra & Valor, Josep, 2005. "CIO herds and user gangs in the adoption of open source software," IESE Research Papers D/595, IESE Business School.
    2. Sax, Matthias, 2006. "Economic efficiency of free and open source software in the public sector: the example of Chile," Documentos de Proyectos 3535, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    3. Raasch, Christina & Lee, Viktor & Spaeth, Sebastian & Herstatt, Cornelius, 2013. "The rise and fall of interdisciplinary research: The case of open source innovation," Research Policy, Elsevier, vol. 42(5), pages 1138-1151.
    4. Evangelos Katsamakas & Mingdi Xin, 2005. "An economic analysis of enterprise adoption of open source software," Working Papers 05-29, NET Institute, revised Oct 2005.

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    More about this item

    Keywords

    software market; open source software; mandatory adoption; information campaign; subsidisation; network externalities;
    All these keywords.

    JEL classification:

    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L63 - Industrial Organization - - Industry Studies: Manufacturing - - - Microelectronics; Computers; Communications Equipment

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