(Self-)Regulation of a Natural Monopoly via Complementary Goods - the Case of F/OSS Business Models

Markus Pasche

No 18/2005, Jenaer Schriften zur Wirtschaftswissenschaft (Expired!) from Friedrich Schiller University of Jena, School of of Economics and Business Administration

Abstract: The paper investigates the optimal regulation of a (software) firm which acts as a natural monopolist, who also offers a complementary good (IT services) on a competitive market. It is shown that a first-best-regulation accompanyied with an optimal taxation schedule in order to compensate the losses is equivalent to a cross-subsidisation of the software by the complementary good. This is the same result as in business models with Free/Open Source Software (F/OSS). Even if a price of zero for F/OSS does not reflect the use of resources for software development, the price system in F/OSS related markets leads to a welfare improving allocation. F/OSS license models can be seen as institutional arrangements which mimick a social planner.

Keywords: natural monopoly; regulation; Ramsey pricing; welfare; complementary good; Open Source Software (search for similar items in EconPapers)
JEL-codes: H21 L51 (search for similar items in EconPapers)
Date: 2005-11-10
New Economics Papers: this item is included in nep-com, nep-mic and nep-pbe
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Persistent link: https://EconPapers.repec.org/RePEc:jen:jenasw:2005-18

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