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Industry Equilibrium With Open Source And Proprietary Firms

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Executive Summary

The authors present a model of industry equilibrium to study the coexistence of Open Source (OS) and Proprietary (P) firms. Two novel aspects of the model are: participation in OS arises as the optimal decision of profit-maximizing firms, and OS and P 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 (like software) and a complementary private good. The only difference between both kinds of firms is that OS share their technological advances on the primary well, while P keeps their innovations private.

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