Free and Open-Source Software: Coordination and Competition

Robin Ng ()

CRC TR 224 Discussion Paper Series from University of Bonn and University of Mannheim, Germany

Abstract: Free and Open-Source Software (FOSS) are developed by a community of developers led by a coordinator. Coordinators balance the following trade-off: (i) more developers improve FOSS quality—a positive vertical differentiation effect; (ii) more developers lead to more diverse views, driving FOSS characteristics away from the preferences of existing developers—a negative horizontal differentiation effect. FOSS are able to attract more developers when coordinators improve their level of coordination, increasing the marginal vertical network effect, or by having a more permissive Open-Source license, increasing the marginal horizontal network effect. More permissive Open-Source licenses can intensify competition between FOSS and proprietary software, resulting in lower prices. However permissive licenses may reduce the incentives to coordinate FOSS, leading to lower quality FOSS that only serve niche markets. I explore coordinators who may have different motivations—self-interested Founders, volunteering Altruists, and profit-driven Managers—discussing when and how they choose to coordinate FOSS.

Keywords: Open-Source Software; Network effects; Software Licensing (search for similar items in EconPapers)
JEL-codes: D21 D26 L14 L17 (search for similar items in EconPapers)
Pages: 44
Date: 2024-08
New Economics Papers: this item is included in nep-com, nep-ind and nep-mic
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