Competition with Open Source as a Public Good

Journal of Industrial and Management Optimization, Vol. 4, No. 1, pp. 199-211, February 2008

13 Pages Posted: 6 Feb 2008 Last revised: 22 Jun 2014

See all articles by Ernan Haruvy

Ernan Haruvy

University of Texas at Dallas - Naveen Jindal School of Management

Ashutosh Prasad

University of California, Riverside (UCR)

Suresh Sethi

University of Texas at Dallas - Naveen Jindal School of Management

Rong Zhang

Chongqing University - College of Economics and Business Administration

Abstract

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 freeriding. 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.

Keywords: Differential Games, Public Goods, Open source, Software, Nash equilibrium, Two point boundary Value Problems, Optimal control, welfare maximization

JEL Classification: C61, M31, M00, C72, D6

Suggested Citation

Haruvy, Ernan and Prasad, Ashutosh and Sethi, Suresh and Zhang, Rong, Competition with Open Source as a Public Good. Journal of Industrial and Management Optimization, Vol. 4, No. 1, pp. 199-211, February 2008. Available at SSRN: https://ssrn.com/abstract=1089852

Ernan Haruvy

University of Texas at Dallas - Naveen Jindal School of Management ( email )

P.O. Box 830688
Richardson, TX 75083-0688
United States

Ashutosh Prasad

University of California, Riverside (UCR)

900 University Avenue
Riverside, CA 92521
United States

Suresh Sethi (Contact Author)

University of Texas at Dallas - Naveen Jindal School of Management ( email )

800 W. Campbell Road, SM30
Richardson, TX 75080-3021
United States

Rong Zhang

Chongqing University - College of Economics and Business Administration ( email )

Chongqing 400030
China

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