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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 free-riding. 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.
Mathematics Subject Classification: Primary: 49N90, 90B50; Secondary: 91A23, 91A05, 49N70.
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