Open Source Software: Competition with A Public Good

Vidya Atal, Kameshwari Shankar

Research output: Contribution to journalArticlepeer-review

7 Scopus citations


This paper looks at price and quality competition in software markets under two different forms of competition—one where two proprietary firms first choose quality and then engage in price competition, and second where a proprietary firm faces competition from an open source software (OSS) firm that allows its users to determine quality level and provides the software at zero price. We find that OSS competition never improves quality for consumers who value quality highly. However, it may provide greater quality to users with a low valuation for quality. In addition, we find that although OSS has a zero market price, the public good nature of OSS competition can lessen price competition, making the proprietary firm better-off with increased profit but leaving consumers worse-off with lower surplus.

Original languageEnglish
Pages (from-to)333-345
Number of pages13
JournalAtlantic Economic Journal
Issue number3
StatePublished - 1 Sep 2014


  • Duopoly
  • Open source software
  • Price competition
  • Vertical differentiation


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