Author(s)
Source
Journal of Economics & Management Strategy, Vol. 23, No. 2, pp. 294-316, 2014
Summary
This paper explores how open-source software projects evolve. Factors include gains in quality, contributing programmers, and users who offer customer support. Commercial firms compete with open source projects, and must choose how to price their product in response to open source offerings.
Policy Relevance
Commercial firms can affect the evolution of open source projects by strategic pricing.
Main Points
- In an open source project, the code is freely available, and most programmers are volunteers; some commercial firms compete with open source products, while others support open source projects.
- This paper creates a model based on the idea that open source programmers are motivated by the desire to reciprocate the altruism of other participants.
- When a commercial firm competes with an open source product, the commercial firm usually benefits when open source quality is low; if the commercial firm lowers its product price, the open source product will tend to improve its quality more slowly.
- When the open source project is in its infancy, the commercial firm benefits little from lowering prices, because it will lose profits but have little effect on the open source product.
- Without a core group of founders committed to providing user support, open source projects struggle to get off the ground; industry observers note that commercial products tend to better serve unsophisticated users.
- The need for user support is a key factor in open source development.
- Altruistic users willing to support other users tend to become less involved over time.
- Commercial firms can reduce their prices and eliminate the user base of the open source project.
- When the size of the user base affects the open source programmer’s motivation, price cuts by competing firm can discourage gains in the quality of the open source project.
- Commercial firms can change the shape of the market in the long run by supporting open source projects in the short run.