The impact of open source software on proprietary software firms' profit and social welfare

To read the full-text of this research, you can request a copy directly from the author.


open source software has been achieved notable success in recent years and becomes a powerful rival to proprietary software in the software industry. Through modifying the Cournot model, this study analyzes how open source software affects the profit of proprietary software firms and social welfare. This paper supposes that proprietary software firms aim at maximizing profit and open source software can be freely available. It mainly finds that the emergence of open source software doesn't always decrease (resp. reduce) the proprietary software firm's profit or output (resp. price) and increase the social welfare. This conclusion contradicts the traditional recognition of people to open source software.

No full-text available

Request Full-text Paper PDF

To read the full-text of this research,
you can request a copy directly from the author.

ResearchGate has not been able to resolve any citations for this publication.
Software firms are observed to support programmers' communities, which develop rival open source programs. A firm selling a copyright program has an incentive to support substitute copyleft programming when support creates compatibility between the programs and programs exhibit network effects. Costly compatibility benefits the firm as its consumers gain access to the community's services but may also hurt the firm because it cannot profit from the valuation difference between incompatible networks. The incentive arises under a weak network effect even when the consumers' benefit is small. Standardization and enlarging the open source programmers' community do not always increase welfare.
Open source is a term that has recently gained currency as a way to describe the tradition of open standards, shared source code and collaborative development behind software such as the Linux and FreeBSD operating systems, the Apache Web server, the Perl, Tcl, and Python languages, and much of the Internet infrastructure, including Bind, the Sendmail mail server and many other programs. Officially, open source, which is a trademark of the Open Source Initiative, means more than that source code is available. The source must be available for redistribution without restriction and without charge, and the license must permit the creation of modifications and derivative works and must allow those derivatives to be redistributed under the same terms as the original work. Licenses that lower barriers to cooperation are a key part of the open-source phenomenon. But open source is more than just a matter of licenses. Many open-source projects have been started to solve a user's particular problem.