Dynamic Mixed Duopoly: A Model Motivated by Linux vs. Windows

43 Pages Posted: 4 Sep 2003

See all articles by Ramon Casadesus-Masanell

Ramon Casadesus-Masanell

Harvard University - Strategy Unit

Pankaj Ghemawat

University of Navarra, IESE Business School; New York University (NYU) - Leonard N. Stern School of Business

Date Written: September 2003

Abstract

This paper analyzes a dynamic mixed duopoly in which a profit-maximizing competitor interacts with a competitor that prices at zero (or marginal cost), with the cumulation of output affecting their relative positions over time. The modeling effort is motivated by interactions between Linux, an open-source operating system, and Microsoft's Windows in the computer server segment, and consequently emphasizes demand-side learning effects that generate dynamic scale economies (or network externalities). Analytical characterizations of the equilibrium under such conditions are offered, and some comparative static and welfare effects are examined.

Keywords: Open-source, free software, network effects, mixed duopoly, competitive dynamics, demand-side learning, Linux, Windows, Microsoft

JEL Classification: L1, L2, L3, L86

Suggested Citation

Casadesus-Masanell, Ramon and Ghemawat, Pankaj, Dynamic Mixed Duopoly: A Model Motivated by Linux vs. Windows (September 2003). Strategy Unit Working Paper No. 04-012; IESE Working Paper No. D/519. Available at SSRN: https://ssrn.com/abstract=439340 or http://dx.doi.org/10.2139/ssrn.439340

Ramon Casadesus-Masanell (Contact Author)

Harvard University - Strategy Unit ( email )

Harvard Business School
Soldiers Field Road
Boston, MA 02163
United States
617-496-0176 (Phone)
617-496-5859 (Fax)

HOME PAGE: http://www.people.hbs.edu/rmasanell

Pankaj Ghemawat

University of Navarra, IESE Business School ( email )

Avenida Pearson 21
Barcelona, 08034
Spain

New York University (NYU) - Leonard N. Stern School of Business ( email )

Suite 9-160
New York, NY
United States

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