Harvesting Altruism in Open-Source Software Development

Journal of Optimization Theory and Applications, Vol. 118, No. 2, August 2003

36 Pages Posted: 4 Jun 2002 Last revised: 2 Jul 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

Date Written: May 1, 2002

Abstract

Firms have the choice of developing software as either open source or closed source. The open-source approach to software development has been advocated as a new and better method for developing high quality software than the traditional closed-source approach. In open source, volunteer programmers freely contribute code to develop and improve the software. This paper describes the key nonpecuniary motivations for these programmers. They are less motivated to contribute if they observe commercial marketing of the open-source software they helped create, leading to a reduction in improvements to the software. A primary concern for software firms seeking to develop and market open-source software is, thus, how the motivation of contributors should be managed. We examine optimal pricing strategies for open-source and closed-source software keeping in mind the distinct motivations of programmers in the two cases. We compare profits and software qualities from the two approaches and provide implications for firms in the software industry.

Keywords: Open source, pricing, altruism, optimal control, software management, the maximum principle, chattering control

JEL Classification: C61, D42, D6, D84

Suggested Citation

Haruvy, Ernan and Prasad, Ashutosh and Sethi, Suresh, Harvesting Altruism in Open-Source Software Development (May 1, 2002). Journal of Optimization Theory and Applications, Vol. 118, No. 2, August 2003 . Available at SSRN: https://ssrn.com/abstract=312279 or http://dx.doi.org/10.2139/ssrn.312279

Ernan Haruvy (Contact Author)

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

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

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

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