Industry equilibrium with open-source and proprietary firms

Gastón Llanes () and Ramiro de Elejalde

International Journal of Industrial Organization, 2013, vol. 31, issue 1, 36-49

Abstract: We present a model of industry equilibrium to study the coexistence of open-source and proprietary firms. Two novel aspects of the model are (i) participation in open source arises as the optimal decision of profit-maximizing firms, and (ii) open-source and proprietary firms may (or may not) coexist in equilibrium. Firms decide their type and investment in R&D, and sell packages composed of a primary good and a complementary private good. Open-source firms share their technological advances on the primary good, whereas proprietary firms keep their innovations private. The main contribution of the paper is to determine conditions under which open-source and proprietary firms coexist in equilibrium. Interestingly, this equilibrium is characterized by an asymmetric market structure, with few large proprietary firms and many small open-source firms. We also study the limiting economy and present conditions under which large numbers favor cooperation in R&D.

Keywords: Industry equilibrium; Coexistence; Open source; Complementarity; Technology sharing; Cooperation in R&D (search for similar items in EconPapers)
JEL-codes: D43 L17 O31 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

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Related works:
Working Paper: Industry Equilibrium with Open Source and Proprietary Firms (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:31:y:2013:i:1:p:36-49

DOI: 10.1016/j.ijindorg.2012.09.003

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