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Public Subsidies for Open Source? Some Economic Policy Issues of the Software Market

41 Pages Posted: 15 Apr 2003  

Klaus M. Schmidt

Ludwig Maximilian University of Munich - Faculty of Economics; CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR)

Monika Schnitzer

University of Munich - Department of Economics; Centre for Economic Policy Research (CEPR)

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Date Written: February 2003

Abstract

This Paper discusses the economic merits of direct or indirect governmental support for open source projects. Software markets differ from standard textbook markets in three important respects that may give rise to market failures: (i) large economies of scale, (ii) crucially important innovations, (iii) significant network effects and switching costs. We analyse the differences between proprietary software and open source software with respect to these market features and ask whether open source as an alternative to proprietary software can mitigate these problems. Then we discuss the implications of various forms of governmental support for open source.

Keywords: Software market, open source, innovation incentives, public goods, public subsidies

JEL Classification: H41, O31, O38

Suggested Citation

Schmidt, Klaus M. and Schnitzer, Monika, Public Subsidies for Open Source? Some Economic Policy Issues of the Software Market (February 2003). CEPR Discussion Paper No. 3793. Available at SSRN: https://ssrn.com/abstract=395461

Klaus M. Schmidt (Contact Author)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Ludwig Maximilian University of Munich - Faculty of Economics ( email )

Ludwigstrasse 28
Munich, D-80539
Germany
+49 89 2180 3405 (Phone)
+49 89 2180 3510 (Fax)

Monika Schnitzer

University of Munich - Department of Economics ( email )

Ludwigstrasse 28
Munich, D-80539
Germany
+49 89 2180 2217 (Phone)
+49 89 2180 2767 (Fax)

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

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