Public Subsidies for Open Source? Some Economic Policy Issues of the Software Market

Klaus Schmidt () and Monika Schnitzer ()

No 3793, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: This Paper discusses the economic merits of direct or indirect governmental support for open source projects. Software markets differ from standard textbook markets in three important respects that may give rise to market failures: (i) large economies of scale, (ii) crucially important innovations, (iii) significant network effects and switching costs. We analyse the differences between proprietary software and open source software with respect to these market features and ask whether open source as an alternative to proprietary software can mitigate these problems. Then we discuss the implications of various forms of governmental support for open source.

Keywords: Software market; Open source; Innovation incentives; Public goods; Public subsidies (search for similar items in EconPapers)
JEL-codes: H41 O31 O38 (search for similar items in EconPapers)
Date: 2003-02
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Citations: View citations in EconPapers (35)

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