Could coexistence of open‐source and proprietary platforms be an equilibrium outcome?

Chung‐Hui Chou

Manchester School, 2021, vol. 89, issue 3, 297-309

Abstract: Coexistence of open‐source (OS) and proprietary (PP) platforms observed in several industries motivates us to study the equilibrium structure of a two‐sided market when platforms can commit to OS strategically. This paper considers a symmetric market with simultaneous arrival of content providers and hardware users, and discovers that coexistence of OS and PP platforms is the unique equilibrium outcome in which the PP platform prefers to commit to a license fee before hardware price competition. The above result delivers three contributions to the literature of two‐sided markets. First, the OS platform owns more content provision, but gets a smaller share in the hardware device market. Second, OS commitments may induce coexistence of asymmetric platforms as well as network size or price commitments do which were presented in literature. Third, social welfare increases with the numbers of OS platforms; whereas consumers’ surplus decreases with them.

Date: 2021
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