Open Source Development in a Differentiated Duopoly
Stephane H. Verani · RePEc: Research Papers in Economics · 2006
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 dierentiated duopoly in which frms invest in the development of proprietary or open source software. The main fndings are: (i) frms invest more when the products are substitutes; (ii) for substitute products, frms’investment in software development is greatest when the software is open source; (iii) for close to perfect complements, frms’ investment in software development is greatest when the software is proprietary; and (iv) for substitute products, investment in open source software yields higher profts than investment in proprietary software.