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Dynamic Mixed Duopoly. A Model Motivated by Linux versus Windows

Ramón Casadesus-Masanell () and Pankaj Ghemawat ()
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Ramón Casadesus-Masanell: HARVARD BUSINESS SCHOOL
Pankaj Ghemawat: HARVARD BUSINESS SCHOOL

No 201048, Working Papers from Fundacion BBVA / BBVA Foundation

Abstract: This paper analyzes a dynamic mixed duopoly in which a profit-maximizing competitor interacts with a competitor that prices at zero (or marginal cost), with the cumulation of output affecting their relative positions over time. The modeling effort is motivated by interactions between Linux, an open-source operating system, and Microsoft s Windows, and consequently emphasizes demand-side learning effects that generate dynamic scale economies (or network externalities). Analytical characterizations of the equilibrium under such conditions are offered, and some comparative static and welfare effects are examined.

Keywords: Open Source Software; free software; mixed duopoly; Linux; Microsoft. (search for similar items in EconPapers)
Pages: 41
Date: 2006-10
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