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Private Provision of a Complementary Public Good

Author

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  • Schmidtke, Richard
Abstract
For several years, an increasing number of firms are investing in Open Source Software (OSS). While improvements in such a non-excludable public good cannot be appropriated, companies can benefit indirectly in a complementary proprietary segment. We study this incentive for investment in OSS. In particular we ask how (1) market entry and (2) public investments in the public good affects the firms' production and profits. Surprisingly, we find that there exist cases where incumbents benefit from market entry. Moreover, we show the counter-intuitive result that public spending does not necessarily lead to a decreasing voluntary private contribution.

Suggested Citation

  • Schmidtke, Richard, 2006. "Private Provision of a Complementary Public Good," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 134, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    • Handle: RePEc:trf:wpaper:134
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    File URL: https://epub.ub.uni-muenchen.de/13417/1/134.pdf
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Bottai, Carlo, 2015. "Open Innovation in a Model à la Hotelling," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201526, University of Turin.
    2. Gauguier, Jean-Jacques, 2009. "L’industrialisation de l’Open Source," Economics Thesis from University Paris Dauphine, Paris Dauphine University, number 123456789/4388 edited by Toledano, Joëlle.
    3. Ramon Casadesus-Masanell & Gastón Llanes, 2011. "Mixed Source," Management Science, INFORMS, vol. 57(7), pages 1212-1230, July.
    4. Luigi Balletta & Antonio Tesoriere, 2020. "Cumulative innovation, open source, and distance to frontier," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 22(6), pages 1875-1920, December.
    5. Llanes, Gastón & de Elejalde, Ramiro, 2013. "Industry equilibrium with open-source and proprietary firms," International Journal of Industrial Organization, Elsevier, vol. 31(1), pages 36-49.
    6. Heijdra, Ben J. & Ligthart, Jenny E., 2007. "Fiscal policy, monopolistic competition, and finite lives," Journal of Economic Dynamics and Control, Elsevier, vol. 31(1), pages 325-359, January.
    7. Sebastian von Engelhardt, 2010. "Quality Competition or Quality Cooperation? License-Type and the Strategic Nature of Open Source vs. Closed Source Business Models," Jena Economics Research Papers 2010-034, Friedrich-Schiller-University Jena.
    8. Karamollah Bagherifard & Mohsen Rahmani & Vahid Rafe & Mehrbakhsh Nilashi, 2018. "A Recommendation Method Based on Semantic Similarity and Complementarity Using Weighted Taxonomy: A Case on Construction Materials Dataset," Journal of Information & Knowledge Management (JIKM), World Scientific Publishing Co. Pte. Ltd., vol. 17(01), pages 1-26, March.

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    More about this item

    Keywords

    Open Source Software; Private Provision of Public Goods; Cournot-Nash Equilibrium; Complements; Market Entry;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

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