January  2008, 4(1): 199-211. doi: 10.3934/jimo.2008.4.199

Competition with open source as a public good

1. 

School of Management, The University of Texas at Dallas, Richardson, TX 75080, United States, United States, United States

2. 

Chongqing University, Chongqing 400044, China

Received  May 2007 Revised  September 2007 Published  January 2008

The open source paradigm is often defined as a ''collaborative effort,'' implying that firms and consumers come together in a non-competitive climate. We show here that open source development can arise from a competitive climate. Under competition, we find that open source is the surplus maximizing outcome and can be in equilibrium if cost asymmetries are small. However, when cost asymmetries are large, contradictions between equilibrium and welfare maximization result. Considerations typical to public good problems arise, with issues of asymmetric contributions and free-riding. These issues should guide the firm's as well as the society's decisions to implement open source in particular environments. We analyze this problem in the framework of a dynamic duopolistic competition, with firms controlling their investments in software.
Citation: Ernan Haruvy, Ashutosh Prasad, Suresh Sethi, Rong Zhang. Competition with open source as a public good. Journal of Industrial & Management Optimization, 2008, 4 (1) : 199-211. doi: 10.3934/jimo.2008.4.199
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